Sofya Ivanova Ltd is a business specialized in cosmetics and perfumery. On January year 0, an investing opportunity is offered with the following conditions.

January Year 0 Investment 275,000; Expected gross operating annual cash flows arising the last day of the year:

Dec. Year 0 100,000

Dec. Year 1 100,000

Dec. Year 2 100,000

Dec. Year 3 100,000

The businesss cost of capital is 10% p.a. Corporation tax is charged on profits at the rate of 35%, payable during the year in which the profit is earned (assume that the taxable profit equals the gross operating cash flow)

Required:

1. Calculate the NPV (Net present value) of the project (2 points)
2. What is the DPBP (Discounted payback period) of the project? (1 point)
3. What would you conclude? (1 point)