Gravel Galore is a company owned by Josaf Mokele and Michale Molefi. They started $10$ years ago on a open piece of land next to Josaf$$s home, in their own community to provide sand, stone, gravel, concrete and more to the local people to assist them to gain access to these types of building material more easily.

They became very successful quite fast and they were forced to start looking for a bigger piece of land. They started to diversify into more types and sort of material needed for building purposes.

Josaf Mokele and Michale Molefi are starting to investigate the opportunities to buy even bigger land just outside Piet Retief. They are asking for your assistance in this regards.

You can assume that the discount rate is $9\%$ and cost of capital is $12\%.$

The project will have the following cash flows:

Year

Cash Flow

R$$million

$0$

$(200)$

$1$

$40$

$2$

$60$

$3$

$80$

$4$

$100$

$5$

$120$

Should Gravel Galore invest in projects with NPV $=$ R$0?$

$1.$

Gravel Galore is indifferent between accepting or rejecting projects with zero NPVs

$2.$

Yes

$3.$

No

$4.$

Gravel Galore should look at the PI and IRR of the projects