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ABC Corporation is evaluating a new project requiring an initial investment of Rs. 2,50,000. The project is expected to generate the following cash flows: Year

ABC Corporation is evaluating a new project requiring an initial investment of Rs. 2,50,000. The project is expected to generate the following cash flows:

  • Year 1: Rs. 90,000
  • Year 2: Rs. 1,10,000
  • Year 3: Rs. 80,000
  • Year 4: Rs. 60,000
  • Year 5: Rs. 50,000

The project will be depreciated on a straight-line basis over its 5-year life. The company's tax rate is 25%, and the cost of capital is 10%.

Required:

  • Calculate the project's NPV and IRR.
  • Determine the discounted payback period.
  • Evaluate the profitability index.
  • Compute the annual depreciation expense and its effect on after-tax cash flows.
  • Assess the break-even point in terms of cash flows.

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