The details of estimated project cost, sales and selling price of the product, depreciation and salvage value of a new project are given in the table below. All revenues and costs occur at the end of the period. The income tax rate is 20%. a) Find NPV of the project if the discount rate is 10%. b) The promoters has invested Rs 55 million in Year 1 and Rs 35 million in Year 2. Prepare the cash flow statement (Sources of funds and Disposition of funds). Show all calculations.

Year-1 Year-2 Year-3 Year-4 Year-5 Year-6 Project Cost (Rs million) 50 30 Sales (million units) 3 4 5 6 Selling price (Rs/Unit) 10 15 20 20 20 50 80 70 Cost of production (Rs million) 2 2 N N N Depreciation (Rs million) Salvage value (Rs million) This problem has been solved! Year-1 Year-2 Year-3 Year-4 Year-5 Year-6 Project Cost (Rs million) 50 30 Sales (million units) 3 4 5 6 Selling price (Rs/Unit) 10 15 20 20 20 50 80 70 Cost of production (Rs million) 2 2 N N N Depreciation (Rs million) Salvage value (Rs million) This problem has been solved