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YZA Ltd. is evaluating a project with the following financials: Initial investment: Rs. 2,50,000 Project life: 5 years Expected annual profits before tax and after

YZA Ltd. is evaluating a project with the following financials:

  • Initial investment: Rs. 2,50,000
  • Project life: 5 years
  • Expected annual profits before tax and after depreciation: Rs. 80,000, Rs. 85,000, Rs. 75,000, Rs. 70,000, Rs. 65,000

The depreciation rate is 12% on the original cost. The tax rate is 30%, and the cost of capital is 11%.

Required:

  • Calculate the PBP and ARR.
  • Compute the NPV and IRR.
  • Determine the profitability index.
  • Evaluate the impact of a 10% increase in annual profits on the project's NPV.
  • Conduct a sensitivity analysis with a change in the tax rate to 35%.

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