XYZ Enterprises is evaluating a project to modernize its production facility, which has a project life of 5 years. The project will require an initial investment of Rs. 1 crore. Additional machinery costing Rs. 5,00,000 will be needed at the end of the second year. The salvage value of the machinery at the end of the fifth year is estimated to be Rs. 2,00,000.

Annual sales revenue is projected as follows:

• Year 1: Rs. 40,00,000
• Year 2: Rs. 60,00,000
• Year 3: Rs. 80,00,000
• Year 4: Rs. 1,00,00,000
• Year 5: Rs. 1,20,00,000
• The variable cost ratio is 40% of sales, and fixed costs are Rs. 10,00,000 per year.
• The project is subject to a 25% corporate tax rate. The company uses a 12% discount rate to evaluate projects.

Required:

1. Compute the Net Present Value (NPV) of the project.
2. Calculate the payback period for the project.
3. Determine the Accounting Rate of Return (ARR) for the project.
4. Assess the profitability index (PI) for the project.
5. Recommend whether the company should undertake the project based on the calculated metrics.