Reference no: EM131999426

Sony International has an Investment opportunity to produce a new stereo colour TV. The required investment on January 1 of this year is Rs. 32 Million. The firm will depreciate the investment to zero using the straight line method over four years. The Investment has no resale after completion of the project. The firm is in the 34 percent tax bracket. The price of the product will be Rs. 400 per unit, in real terms , and will not change over the life of the project. Labour costs for the Year 1 will be Rs 15.30 per hour, in real terms ,a nd will increase at 2 percent per year in real terms. Energy costs for the year 1 will be 5.15 per physical unit , in real terms , and will increase at 3 percent per year in real terms. The inflation rate is 5 percent per year. Revenue are received and costs are paid at year end. Refer to the table below for the production schedule. Year 1 Year 2 Year 3 Year 4 Physical production, in unit 100,000 200,000 200,000 150,000 Labor input, in hours 2,000,000 2,000,000 2,000,000 2,000,000 Energy input, physical units 200,000 200,000 200,000 200,000 The real discount rate for Sony is 8 percent. Calculate the NPV of this project.