Question: VWX Corp. is considering a project that requires an initial outlay of Rs. 2,50,000 and is expected to generate the following profits: Year 1 2

VWX Corp. is considering a project that requires an initial outlay of Rs. 2,50,000 and is expected to generate the following profits:

Year

1

2

3

4

5

Rs.

50,000

75,000

80,000

90,000

1,00,000

The project will be depreciated on a straight-line basis over 5 years. The corporate tax rate is 35%.

Required:

  1. Compute the Payback Period.
  2. Calculate the Average Rate of Return (ARR).
  3. Determine the Net Present Value (NPV) at a discount rate of 10%.
  4. Find the Internal Rate of Return (IRR).
  5. Assess the project's feasibility based on NPV and IRR.

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