than that of Model 71.650. It is advised to select super Techtronics Ltd., an existing company is considering a new project for manufacture of pocket video games involving a capital expenditure of 600 lakhs and working capital of 3150 lakhs. The capacity of the plant is to an to be as indicated below. annual production of 12 lakh units and capacity utilisation during the 6-year working life of the project is expected Year Capacity utilisation (%) 1 33 1/3% 2 66 2/3% 3 4-6 90% 100% The average price per unit of the product is expected to be *200 netting a contribution of 40%. Annual fixed costs. excluding depreciation, are estimated to be 480 lakhs per annum from the third year onwards: for the first and second year it would be *240lakhs and 360 lakhs respectively. The average rate of depreciation for tax purposes At the end of the third year, an additional investment of 7100 lakhs would be required for working capital The company, without taking into account the effects of financial leverage, has targeted for a rate of return of 15%. You are required to indicate whether the proposal is viable, giving your working notes and analysis. Terminal value for the fixed assets may be taken at 10% and for the current assets at 100%. Calculation may be rounded off to lakhs of rupees. For the purpose of your calculations, the recent amendments to tax laws with regard to balancing charge may be ignored