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A company is considering an investment of 650 lakhs in a new facility. The expected cash flows from the facility over the next seven years

A company is considering an investment of ₹650 lakhs in a new facility. The expected cash flows from the facility over the next seven years are as follows:

Year

Cash Flow (₹ in lakhs)

1

160

2

170

3

180

4

190

5

200

6

210

7

220

The discount rate is 10%, and the facility has no salvage value at the end of its life. The depreciation method is 20% per year on a straight-line basis.

Required:

  1. Calculate the NPV of the investment.
  2. Determine the IRR.
  3. Compute the Profitability Index.
  4. Analyze the project's sensitivity to a 15% increase in initial investment.
  5. Evaluate the impact of different depreciation methods on the project's financial metrics.

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