Kopano Ke Matla Construction is a medium sized company. The company was founded in 2009 with an initial loan of R2,500,000 and a staff compliment of 5. The company now also wants to expand aggressively into the field of road construction.

An executive recently left the company quickly in a cloud of scandal. You are to complete the evaluation of a project that this executive worked on. The uncertain cash flows for a project, compiled earlier, are shown in the below probability tree diagram. The analysis period is two years and the MARR is 10% per year. Determine the expected NPV of this project and make a recommendation on whether or not to start with the project. Year 0 Cash flow Probability Year 1 Cash flow Probability Year 2 Cash flow 0,2 R 230 000,00 0.6 R 280 000,00 R 200 000,00 0.2 R 220 000,00 0,3 0.4 R 450 000,00 -R 780 000,00 0,4 R 450 000,00 0,2 R 560 000,00 0.4 R 580 000,00 0,3 0,3 R 560 000,00 R 520 000,00 0.3 R 450 000,00 0.4 R 610 000,00