GHI Industries is considering an investment project that requires an initial outlay of Rs. 5,00,000. The project is expected to last for 5 years with the following annual profits before tax and after depreciation:

• Year 1: Rs. 1,50,000
• Year 2: Rs. 1,40,000
• Year 3: Rs. 1,30,000
• Year 4: Rs. 1,20,000
• Year 5: Rs. 1,00,000

The project will be depreciated at 15% per annum on the original cost. The tax rate is 30%, and the cost of capital is 8%.

Required:

• Determine the PBP and ARR.
• Calculate the NPV and IRR.
• Evaluate the profitability index.
• Analyze the effect of a 5% increase in annual profits on the NPV.
• Assess the project's sensitivity to a 2% change in the cost of capital.