MNO Corporation is evaluating a project that requires an investment of Rs. 650 lakhs in new plant and equipment. The projected earnings before depreciation and taxes are:

• Year 1: Rs. 270 lakhs
• Year 2: Rs. 280 lakhs
• Year 3: Rs. 290 lakhs
• Year 4: Rs. 300 lakhs
• Year 5: Rs. 310 lakhs
• The cost of capital is 14%.
• Depreciation is to be charged at 10% per annum on a Straight Line basis.
• The plant has no salvage value at the end of five years.
• Assume no income tax.

Requirements:

• Calculate the annual depreciation.
• Compute the NPV of the project.
• Determine the IRR.
• Calculate the profitability index.

Make a recommendation based on the calculated metrics