Following information was obtained based on a three-year R&D study conducted by an ongoing manufacturing company's marketing department costing the company Rs. 500,000/-

Cost of building production facilities: Rs. 48,000,000

Capital expenditure: Rs. 4,000,000

Land purchased 2 years back not used at present: Rs. 2,000,000

Net working Capital required: Rs. 10,000,000

Project Life: 4 years

Depreciation method for production facility: Straight line

Salvage Value of building and land: Rs. 4,000,000.

Value of land will remain the same throughout the project.

4 years sales estimation of new product (P1): 10,000 / year

Price per unit: Rs. 10,000.

Variable Cost: Rs 5,500 per Anum

Other expenses: Rs 6,000,000 per Anum.

Other Information available about the company is as follows:

Income Taxes rate: 40%

The companys 50% of the capital consists of common shares with a current share price of Rs. 33 per share. Market return is 18% and recent T-bills rate was 9%. The companys beta is 1.80 while most recent dividend amount paid by the company is Rs 4.40. Remaining 50% capital is raised by issuing 15% coupon bond which is being traded in the market for Rs. 1,100 and has a maturity of 12 years.

Calculate the following and find out if the project is feasible or not:

a) Cost of Equity capital (5 marks)

b) Cost of debt financing. (5 marks)

c) Weighted Average Cost of Capital (5 marks)

d) Cash flows for the investment (10 marks)

e) Pay Period (2 marks) f) NPV using the WACC calculated in part c. (3+1 marks) g) Internal rate of return (IRR) (3+1 marks