ABC Manufacturing Ltd is a mid-sized engineering and fabrication company that supplies precision components to the automobile and heavy machinery…

ABC Manufacturing Ltd is a mid-sized engineering and fabrication company that supplies precision components to the automobile and heavy machinery sectors. In order to maintain competitiveness and expand its market share, the company has proposed a new capital investment project involving the purchase and installation of advanced Computer Numerical Control (CNC) machines and automated assembly lines. The estimated cost of the project is to be financed partly through internal accruals and largely through term loans from XYZ Bank. ABC Manufacturing has approached the bank requesting project financing of the initial outlay, citing strong growth potential in demand for precision-engineered products over the next decade. Financial Projections Provided by ABC Manufacturing Ltd. The company's feasibility report outlines the following: The simple payback period is estimated at 5 years, assuming cumulative cash inflows cover the initial investment within that timeframe without considering the time value of money.The discounted payback period is calculated at 7 years, after discounting projected cash inflows at the weighted average cost of capital (WACC).The project's Modified Internal Rate of Return (MIRR) is projected at 10.9%, which is much lower than the incremental borrowing rate.Terminal Value of the annual cash inflows reinvested at the rate of 10% is 11,43,589.Cash inflows are expected to be received equally and steadily at the end of every year over the life of the assets. However, the same Cash inflows are expected to be received even after the simple payback period due to efficiency gains, market expansion, and economies of scale. (Note: Round off Initial investment to nearest Lakhs). The credit team must now prepare a recommendation on whether to finance the project and, if so, under what conditions. Assuming you were the credit analyst, prepare justification report with a reasoned argument based on other financial considerations namely, PI, NPV, IRR & ARR in the following format. Appraisal technic Acceptable range Outcome for this asset Recommendation NPV MIRR Simple payback Discount payback ARR PI