QUESTION 3 Rubble Limited (Rubble) is listed on the JSE. The company has a large chain of various retail outlets, including both high-end and affordable fashionware, homeware and furniture. Rubble is considering opening a variety of new stores in a new shopping complex being developed on the Dolphin Coast in South Africa. The Dolphin Coast is located just north of Ballito. Below is information pertaining to the expected cash flows: Cost of store installations (leasehold improvements) - R1.25 million Revenue from stores - R400 000 per annum Variable Costs of the stores - R100 000 per annum Fixed Cost - R50 000 (rental of the floor space, there is an inflationary clause in the contract) Depreciation of store installations (leashold improvements) - R312 500 Useful life of leasehold improvements - 15 years SARS Allowance - 10 years Net cash flow expected after 5 years - R175 000 after tax as at the end of year 5 . CPI6% The nominal WACC rate is 15%. Additional Information: - The tax rate is 28% - Any assessed loss can be used on other projects. 3.1 Calculate the Net Present Value (NPV) of the project. 3.2 With reference to the article below, discuss whether Rubble should invest in this new shopping complex. Your answer should also include an analysis of the geographical location of the new investment. This activity also requires you to consider the surrounding areas and whether such investment would be viable. QUESTION 3 Rubble Limited (Rubble) is listed on the JSE. The company has a large chain of various retail outlets, including both high-end and affordable fashionware, homeware and furniture. Rubble is considering opening a variety of new stores in a new shopping complex being developed on the Dolphin Coast in South Africa. The Dolphin Coast is located just north of Ballito. Below is information pertaining to the expected cash flows: Cost of store installations (leasehold improvements) - R1.25 million Revenue from stores - R400 000 per annum Variable Costs of the stores - R100 000 per annum Fixed Cost - R50 000 (rental of the floor space, there is an inflationary clause in the contract) Depreciation of store installations (leashold improvements) - R312 500 Useful life of leasehold improvements - 15 years SARS Allowance - 10 years Net cash flow expected after 5 years - R175 000 after tax as at the end of year 5 . CPI6% The nominal WACC rate is 15%. Additional Information: - The tax rate is 28% - Any assessed loss can be used on other projects. 3.1 Calculate the Net Present Value (NPV) of the project. 3.2 With reference to the article below, discuss whether Rubble should invest in this new shopping complex. Your answer should also include an analysis of the geographical location of the new investment. This activity also requires you to consider the surrounding areas and whether such investment would be viable