Question 2

An enterprise is evaluating a proposal to undertake a new venture that requires an upfront investment of Rs. 350 lakhs. The expected earnings before interest, taxes, depreciation, and amortization (EBITDA) for the next five years are as follows:

Year	EBITDA (Rs. in lakhs)
1	150
2	170
3	180
4	160
5	140

The cost of capital is 11%, and the company uses a 20% depreciation rate on a written-down value basis. The salvage value at the end of the project is expected to be Rs. 30 lakhs. No taxes are considered in the analysis.

Requirements:

1. Calculate the net present value (NPV) of the project.
2. Determine the internal rate of return (IRR).
3. Calculate the discounted payback period.
4. Assess the impact of a 2% increase in the cost of capital on the NPV.
5. Provide a recommendation on whether the project should be accepted.