Jennie Components Ltd. is a leading manufacturer of industrial metal sheets and precision-engineered components supplied to automobile,…

Jennie Components Ltd. is a leading manufacturer of industrial metal sheets and precision-engineered components supplied to automobile, infrastructure, and construction companies across India. Over the last few years, the company has expanded its production capacity significantly due to rising demand from electric vehicle manufacturers and large-scale infrastructure projects. However, the manufacturing operations of the company generate substantial quantities of metal scrap and chemical waste as a by-product of the production process. At present, the company disposes of the waste through an external waste-management agency and incurs disposal charges of ₹0.50 per kilogram. Under normal operating conditions, the company generates approximately 20,00,000 kilograms of waste annually. Recently, increasing environmental compliance requirements and rising waste-management costs prompted the management to explore whether the waste material could be commercially utilized instead of being discarded. After conducting detailed technical research and laboratory testing involving an expenditure of ₹12,00,000, the company's technical team discovered that the waste could be processed further and converted into reusable industrial filler material used in cement, paint, and construction chemical industries. Market surveys conducted by the marketing department indicated strong demand for the processed material, and management expects that the entire quantity processed each year can be sold without any difficulty at a selling price of ₹5 per kilogram. The proposed further-processing activity would require installation of a specialized processing machine costing ₹1,20,00,000. The machine is expected to have a useful life of 10 years with no salvage value at the end of its life. Depreciation on the machine would be charged under the straight-line method. The processing activity would involve additional variable processing cost of ₹2.50 per kilogram along with annual advertising expenditure of ₹4,00,000 and additional fixed operating expenses of ₹6,00,000 per annum, excluding depreciation. The Finance Director CA K. Aananda informed the Board that the company's cost of capital is 15% and the applicable corporate tax rate is 50%. The present value annuity factor for ₹1 for 10 years at 15% is 5.019. The management further clarified that there would be no loss of quantity during processing and all annual cash flows are expected to occur at the end of each year. The Board of Directors has requested the finance team to evaluate the financial viability of processing the waste further instead of disposing it externally and advise whether the proposal would enhance shareholders' wealth.