CAMINAYSH Ltd, a major private equity fund company based in Windhoek. The fund is considering investing in public-private partnership of school blocks in the North as part of its investment portfolio. The project is promising and its part of a major government project to revitalise education in that part of the country as part of the partys manifestos. The investment is expected to have a lifespan oof four years after which the government takes over the operations of the school. The cost of initial investment in the project is estimated at 677 500 and it is expected to generate a net operating income of 80 400 that is expected to grow at 6% thereafter. The investment is to be financed by ration 25:75 equity debt ratio of which the debt component will comprise of 6% fixed interest loan with 30-year maturity having monthly installment payments. The capital gain tax and the marginal tax rate in the country are 20% and 32% respectively while the after-tax required return of the project is estimated at 12%. A depreciation of 19 000 is charged on a straight-line basis with recaptured depreciation set at 25%. The ending market value of the investment is 955 700 and the fund is expected to incur 70 000 in transferring the investment to government.

You are required as the alternative investment analyst of the found to determine the taxes, cash flows after taxes and equity reversion of the proposed project. Is the investment worthwhile? Outline the drawbacks of discounted cashflow as a project valuation technique