Bata Shoe company, a profitable firm is considering an investment of Tk. 5 million in plant and equipment to manufacture new style of shoes. Under the five-year contract for sell at Tk. 1,000 each pair, the terms of the contract call for delivery of 8,000 pairs of shoes in the first year and 16,000 pairs per year for each of the next four years. At the end of year 5 the plant is expected to be scrapped and sold for Tk. 1 million.

The additional information related to this project are given below: Additional information: i. Variable cost per pair is Tk. 550. ii. Fixed cost excluding depreciation is Tk. 1.5 million per year. iii. Depreciation expense per year is Tk. 1 million. iv. Corporate tax rate is 40 percent. v. Additional working capital of Tk. 1.2 million is required at the beginning of the project which will be recaptured at the end of the year 5. vi. Cost of capital of the firm is 10 percent. vii. The management has decided that total acquisition cost of the project must be recovered within 4 years.

Show your workings step by step. DO NOT use Excel