ABC Itd. has a WACC of 15%. The corporate tax rate is 35% and the company can borrow at the interest cost of 10%. The company is considering a new project that would cost Rs. 50 crore and would generate year-end cash flows of Rs. 7 crore after tax but before considering interest. The new project would have a life of 20 years. (PVAF15%,20 = 6.2593, PVAF6.5%,10 = 7,1888 & PVF6.5%,10= 0.5327)

1. Compute standard NPV of the project

2. The govt. is willing to subsidise the project with a concessional loan of Rs. 40 crore @ 7% interest cost repayable after 10 year. Compute NASF & project NPV.

3. What if subsidised loan is of Rs. 45 crore. Compute project NPV