Traders ltd$.$ Is a limited company who specializes in investments. They wish to invest in

either one of the following $10-$year projects with the following cashflows:

Project A:

The project requires an initial investment of R$700000.$

There will be expenses of R$400000$ in arrears for the first $10$ years. These expenses

will be discounted at a rate of $6\%$ for the first $3$ years, a rate of $4\%$ of the next $5$ years

and a rate of $5\%$ for the remaining $2$ years.

This project will only start generating income of R$800000$ at the end of year $3($start

of year $4)$ and will then generate this income yearly for $7$ years $($including the end of

year $3).$ Income will be discounted at $7\%$ interest throughout the entire project.

Project B:

The project requires an initial investment of R$1200000.$

This project will have expenses of R$900000$ in arrears for the duration of $5$ years.

After the $5$ years, the expenses will be R$1000000$ per year $($also in arrears$)$ for $5$

years. Expenses will be discounted at $5\%$ interest throughout the entire project.

There will be income of R$1100,000$ in arrears for the $10$ year period of the project.

These expenses will be discounted at a rate of $6\%$ for the first $3$ years, a rate of $4\%$ of

the next $5$ years and a rate of $5\%$ for the remaining $2$ years.

Calculate the net present value of this project and comment which project is worth doing.

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