DEF Ltd. considers an investment of Rs. 900 lakhs in new machinery, which is expected to generate the following earnings before depreciation and taxes over the next five years:

Year	1	2	3	4	5
Earnings (Rs.in lakhs)	330	340	350	360	370

• The cost of capital is 13%.
• Depreciation is to be charged at 15% on a Written Down Value basis.
• The machinery will have a salvage value of Rs. 80 lakhs at the end of five years.
• Income tax rate is 25%.

Requirements:

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