Hibernia$$s management has carried out detailed market research into the NI market and findings were as follows:

The plan is to test the NI market for $3$ years.

The total market for $3$rd level education in NI is $4,000$ students per year, of which $20\%$ are expected to use private $($non$-$government funded$)$ colleges.

Management estimate that Hibernia could capture $25\%$ of the private market in year one. They also estimate that they could grow this share by $10\%$ annually as a result of the quality of tuition.

The potential fee income for each student is estimated at $5,000$ per annum in year $1$ of operations. It is planned to increase fees by $2\%$ each year thereafter.

The Ni government will pay a fixed grant to Hibernia Ltd$.$ of $200,000$ to promote competition in the fee$-$paying education sector, starting in year $2.$

A building for the venture has been identified, and can be leased for $3$ years, starting at $400,000$ in year $1.$ The lease allows for a $20\%$ annual increase going forward. Running costs of the building will be $40,000$ in year $1,$ increasing by $10,000$ each year after that.

Teaching staff will be seconded from Dublin for the $3$ year period. Initially $6$ teachers will work in NI and salaries are currently $50,000.$ They are budgeted to increase by $5\%$ per year. The teachers will each get $10,000$ towards travel and accommodation, and this allowance is linked to an inflation rate of $10\%.$

Each teacher will receive a bonus equal to $30\%$ of salary $($basic$)$ in any year where college income exceeds $1,100,000.$ The bonus will be paid one year in arrears.

A caretaker will have to be employed at a fixed salary of $20,000$ per year.

$($a$)$ Prepare a report for the board of Hibernia Ltd$.$ which will assess the NPV of the Northern Ireland venture, using a discount rate of $7\%.$