A project aims to deliver a 1.5% increase in the local median housing income within 5 years of its end date.

The project has a total budget of EUR 4m. This is split into EUR 500k for planning and inception, EUR 3m for the implementation phase and EUR500k for closure activities in the final year.

The project will run for 3 years, excluding the planning and inception phase.

Local community contributions to the project is EUR 10k per year from the implementation phase.

The discount rate is 5%. The current median housing income is EUR 5000 pa and there are 10,000 households within the project area.

Questions

a) Calculate the NPV of the project at the point when it is hoped that the median household income will increase by 1.5%.

b) What is the likely period after which the increase of 1.5% to household median income will be achieved.