Is my answer correct?

arks) (05 Marks) ks) b. Diamond Co has just developed a new product to be called Rubi and is now considering whether to put it into production. The following information is available. i. Costs incurred in the development of Rubi will amount to Rs.480,000 ks) ii. Production of Rubi will require the purchase of new machinery at a cost of Rs. 2,400,000 payable immediately. This machinery is specific to the production of Rubi and will be obsolete and valueless when that production ceases. The machinery has a production life of four years and a production capacity of 30,000 units per annum. iii. Production costs for one unit of Rubi (at year 1 prices) are estimated as follows. Rs. 8.00 12.00 Variable materials Variable labour Variable overheads 12.00 In addition, fixed production costs (at year 1 prices), including straight line depreciation on plant and machinery, will amount to Rs.800,000 per annum. Cnst relevant) iv. The selling price of Rubi will be Rs. 80 per unit (at year 1 prices). Demand is expected to be 25,000 units per annum for the next four years. Capital The inflation rate will be 5% per annum for the next four years and the selling price of Rubi is expected to increase at the same rate. Annual inflation rates for production costs are expected to be as follows Variable materials Variable labour Variable overheads Fixed costs vi. The company's weighted average cost of capital in nominal terms is expected to be 15%. CDF) You are required to; Calculate the net present value of Rubi production and advise the directors of Diamond Co whether it should produce Rubi on the basis of the information above. (15 Marks) (Total 20 Marks) 0 co V.M 8 V.L V. Ona COOCO0G03000 C216,320) 24,972 200 C300,000 C330000 (363,000) C399.300) C300,00 0 0312,000) (324,480)|(337,459.20 2,000.00 2,100,000 2,205,000 2,315,250 Sales tevene o 1,200 000 1,250,000 CLS I-clist 1,043,478921,895, 1,301,200 1,353,513 C. | CIS 855,560 773,878 Net och Blows (2,400,000 1.000 PV C2,400,000 1,094,811 NOV project is profitable. the Positive, therefore NPU is Note Developement cost - RS 489,000 Sunk cost - not relevant Depreciation Exp - not relevant Fixed Prodiction costs - not redevant Tax Rate has not been given. 2.46 Gm G 2.62