Question 3

A tech company is planning to launch a new product, which requires an initial investment of Rs. 800 lakhs. The project is projected to generate the following cash inflows over the next six years:

Year	Cash Flow (Rs. in lakhs)
1	150
2	200
3	250
4	300
5	350
6	400

The cost of capital is 15%. The product will have a salvage value of Rs. 100 lakhs at the end of year 6. Annual operating costs are estimated at Rs. 60 lakhs. The company applies a straight-line depreciation method and faces a tax rate of 28%.

Required:

1. Calculate the Net Present Value (NPV) of the project.
2. Determine the Internal Rate of Return (IRR).
3. Calculate the Payback Period.
4. Compute the Modified Internal Rate of Return (MIRR).
5. Recommend whether the company should launch the new product.