Jefferson Plc, who produce a variety of high quality garden furniture and associated items, is considering whether or not to invest in the potential to expand the business, the directors identifying three main options for a four-year plan:

A. Expand its flourishing retail outlet to include all products.

B. Develop into internet sales.

C. Produce greenhouses and conservatories.

These options would require initial expenditure of (A) $750,000, (B) $1,200,000, or (C) $2,000,000. The most recent estimates on year-end cash flows is as follows:

Projects	Year 1	Year 2	Year 3	Year 4
	$000	$000	$000	$000
(A)	400	500	500	500
(B)	500	600	800	1,000
(C)	500	1,000	1,500	1,500

All of these cash flows occur in the year that they arise.

questions solve please

a. An evaluation of the three investment options using the net present value (NPV) technique, assuming the cost of capital to be 8%, and recommend, with reasons, one option.

b. Find the approximate internal rate of return (IRR) of your choice in (a) above.

(You are required to show all calculations)

c. Interpret your results for management, to include: -

i. A presentation of the theoretical arguments for the choice of net present value as the best method of investment appraisal.

ii. Explain the continued popularity among decision makers of non-discounting methods of investment appraisal.

iii. Identify what other factors should be considered before an investment decision is made.