The Municipal council has given a go-ahead for a parking mall to be established under Westwood mall in the city of eThekwini municipality. The cost of the development will amount to R30m. There will be 400 parking bays. The company undertaking the development intends charging a fixed charge of R5 000 per month for the first 5 years and then, the parking mall will be handed over to the municipality at a residual value of R19.5m. Assume R20m of the project cost is payable immediately to the building contractor and the remainder is payable at the end of the first year of the project. SARS will allow 20 years useful life, which is 5% depreciation allowance on a straight-line basis. The project will require an initial working capital investment of R750 000. Assume a required return of 14%. The operating cost is expected to be 40% of total revenue per year. Taxation rate is 28%. Required:

1. Use NPV analyses to determine whether the company should go ahead and invest in the parking mall. (22 marks) 2. Net Present value method is widely used for capital projects evaluation.

Discuss 3 main reasons NPV is considered superior to other capital budgeting techniques. (6 marks)