Question 9

A company is considering a new investment that requires Rs. 380 lakhs. The expected annual savings in costs over the next five years due to this investment are:

Year	Savings (Rs. in lakhs)
1	150
2	160
3	170
4	180
5	190

The company's discount rate is 8%, and the depreciation rate is 12% per annum on a reducing balance basis. The salvage value at the end of the project is Rs. 30 lakhs.

Requirements:

1. Compute the net present value (NPV) of the savings.
2. Calculate the internal rate of return (IRR).
3. Determine the simple payback period.
4. Evaluate the profitability index.
5. Advise the management on the viability of the investment.