Calculate the npv for each of the investment opportunity

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Question - Smile4miles Pte Ltd is considering the opening of its new Learning Centre. The project will involve an investment of $20,000 and will produce a positive cash flow of $1680 in the first year. The cash flows will increase by 15% each year thereafter for another five years (i.e. the project runs for six years). At that stage the project will cease. The company expects a rate of return of 20% on this type of project. Smile4miles Pte Ltd has another option of investing this same $20,000 in renovating his property for his property rental business. The rental business will produce a positive cash flow of $4000 in every year i.e. the cash flow each year will remain the same thereafter for another five years at that stage the project will cease. The company expects a rate of return of 20% on this type of project.

Required -

a. Calculate the NPV for each of the investment opportunity.

 b. Consider this is a mutually exclusive project. As an advisor which project(s) should the company proceed with and why.

Reference no: EM133157020

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