Question 7

An enterprise is assessing a project that requires an initial investment of Rs. 480 lakhs. The project is expected to yield the following annual earnings before interest and taxes (EBIT):

Year	EBIT (Rs. in lakhs)
1	180
2	190
3	200
4	210
5	220

The cost of capital is 15%, and depreciation is charged at 12% per year on a reducing balance method. The salvage value at the end of the project is expected to be Rs. 25 lakhs. The company faces no tax implications.

Requirements:

1. Compute the net present value (NPV) of the project.
2. Calculate the internal rate of return (IRR).
3. Determine the payback period.
4. Assess the project's profitability index.
5. Make a recommendation based on the financial metrics calculated.