A corporation is assessing a proposal to install a new production facility at a cost of Rs. 1000 lakhs. The projected earnings before depreciation and taxes are:

Year	1	2	3	4	5
Earnings (Rs.in lakhs)	350	360	370	380	390

• The discount rate is 15%.
• Depreciation is to be calculated at 10% per annum on a Straight Line basis.
• The facility has no salvage value at the end of five years.
• Assume no income tax.

Requirements:

• Calculate the annual depreciation.
• Compute the NPV of the project.
• Determine the IRR of the project.
• Calculate the payback period.
• Make a recommendation based on the NPV and IRR.