Question 6

A company is considering investing in a new machine costing Rs. 300 lakhs. The machine is expected to produce the following savings in operational costs over its five-year life:

Year	Savings (Rs. in lakhs)
1	100
2	110
3	120
4	130
5	140

The company's required rate of return is 12%, and the machine will be depreciated on a straight-line basis with no salvage value at the end of its life.

Requirements:

1. Calculate the net present value (NPV) of the savings.
2. Determine the internal rate of return (IRR).
3. Compute the payback period.
4. Calculate the accounting rate of return (ARR).
5. Advise on whether the investment is financially viable.