Delta Plc is considering investing in bespoke software solutions, which requires an initial investment of 130,000. The annual cash inflows during years 1-3 are expected to be 38,000 for year 1; 43,000 for year 2 and 50,000 for year 3. The companys money cost of capital is 6% and inflation is expected to be 3% during the life of the project.

Required:

c) Calculate the NPV of the project using the money cost of capital as the discount rate, and state clearly whether the project should be undertaken by the company.

d) Calculate the NPV of the project using the real rate of return as the discount rate (round up to 2 decimal places), and state clearly whether the project should be undertaken by the company.

e) Discuss the likely impact of your outcomes in parts c) and d) above on Delta Plc.