QUESTION 5

ZZZ (Pty) Ltd is considering investing in a new branch. The company estimated the following cash flows:

BWP

Year 0 (135 000)

1 50 000

2 50 000

3 38 000

4 26 000

5 26 000

ZZZ (Pty) Ltd cost of capital is 12 %.

Required: a. Calculate the Net Present Value of this project and advise whether the company should invest in this branch. (6 marks)

b. Highlight any four advantages on the Net Present Value. (4 marks)