The project had to be both economically and technically viable before management would give consent to proceed. Agarwal had already collected basic data for the study and was wondering whether the project would turn out to be economically viableafter all, the decision to move forward with the project now depended on this. What are the variables to analyze if a project is economically viable or not?

Further information:

• Depreciation on fixed assets would be calculated on a straight-line method basis at 19 per cent per year, which would amount to 79 million for each year.
• The salvage value of the fixed assets at the end of the projects life would be 20.80 million.
• Working capital would be recovered in full at the end of the projects life.
• The effective income tax rate was assumed to be 30 per cent for the company.
• The interest rate on long-term debt was assumed to be 12 per cent per year, on a yearly repayment basis. The repayment of principal would be made at the end of each year starting from FY 2017/18. The collateral provided to the bank for the term loan would be fixed assets.
• The interest on bank borrowing on working capital was 14 per cent per year, and the collateral provided to the bank would be hypothecation of stocks and debtors.
• The required rate of return by IVTL (the equity shareholder) was 20 per cent per year, because OFC was a high-technology project. Accordingly, the weighted average cost of capital for the project would be 14.7 per cent per year.