Q.1 A public limited company is considering acquisition of a new plant that costs Rs 20,000,000. The plant has useful life of five (5) years. It will increase the production by 20,000 units. The finished product of the company sells for Rs.400 per unit. The production & operating costs excluding depreciation are Rs. 100 per unit. The plant will be depreciated using straight line method. The incremental tax rate of the company is 30% The plant will be financed as under Sources of Financing Ordinary Shares Preference Shares 15% Term Loan Total Finance (Amount) Rs 8,000,000 Rs. 6,000,000 Rs 6,000,000 Rs. 20.000.000 An average market rate of return on equity is 14%, while preference shares yield is16%. Required: a On the basis of available information, analyze if the company should invest in the plant. You may use present value approach in taking your decision. b. Write a report for the Managing Director advising the actual rate of return (IRR) on the plant