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A company is planning to invest 600 lakhs in a new product line. The expected annual cash flows from the product line for the next

A company is planning to invest ₹600 lakhs in a new product line. The expected annual cash flows from the product line for the next five years are as follows:

Year

Cash Flow (₹ in lakhs)

1

150

2

160

3

170

4

180

5

190

The cost of capital is 13%, and the equipment will depreciate at 20% on a Written Down Value basis. The salvage value at the end of five years is ₹40 lakhs.

Required:

  1. Calculate the NPV of the product line.
  2. Determine the IRR.
  3. Compute the Discounted Payback Period.
  4. Analyze the impact of a 5% increase in annual cash flows on the project's financial metrics.
  5. Evaluate the sensitivity of the NPV to changes in the discount rate (±2%).

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