Question 4

A logistics firm is considering purchasing a fleet of trucks for Rs. 300 lakhs. The trucks are expected to generate the following net cash flows over a seven-year period:

Year	Net Cash Flow (Rs. in lakhs)
1	60
2	70
3	80
4	90
5	100
6	110
7	120

The firm's discount rate is 14%. The fleet will have a residual value of Rs. 30 lakhs at the end of year 7. The trucks will incur annual operating costs of Rs. 20 lakhs. The firm follows a straight-line depreciation policy and is subject to a 35% tax rate.

Required:

1. Calculate the Net Present Value (NPV) of the investment.
2. Determine the Internal Rate of Return (IRR).
3. Calculate the Discounted Payback Period.
4. Compute the Accounting Rate of Return (ARR).
5. Suggest whether the firm should invest in the fleet of trucks.