Bharat Foods limited is a consumer goods manufacturing

company. It is considering a proposal of marketing a new

food product. The project will require an initial investment

of Rs$.1$ million in plant and machinery. It is estimated that

the machinery can be sold for Rs $100,000$ at the end of its

economic life of $6$ years. Assume that the loss of profit on

the sale of the machine is subject to corporate tax rate.

The company can charge an annual written down

depreciation at $25\%$ for the purpose of tax calculation.

$$ Assume that the company$$s tax rate is $35\%$ and the cost of

capital is $18\%.$

$$ Table$1$ provides the investment data and the summarized

profit and loss statement for the new product project.

Estimate the project's cash flows and determine its NPV

and IRR to conclude whether to go ahead or not.