The waterpark project is one of the most exciting projects happening in Dubai where Safa park will witness some important change. Sabb Professionals Ltd, one of the companies who won the construction contract has asked you to assess the project. The project will benefit from low loan rates and would require an annual return of 15% in order to be acceptable. Sabb Professionals Ltd initial investment would be $10,000,000. The company expects to receive annual cash flows of $5,000,000 per year for the first two years, followed by $3,000,000 outlay in year 3, and annual cash flows of $5,500,000 for the 2 last years.

The maximum acceptable payback in the construction sector is currently 4 years.

Based on the information provided, conduct an analysis and recommend if the project is going to add value to Experts Ltd. You should include the use of the following techniques:

(i NPV

(ii) Discounted Payback

(iii) Profitability Index

(iv) IRR

(b) Estimate the initial investment required to reach a profitability index of 3.5. Show your workings.