Question

Whema Ltd is interested in expanding its operations into Durban, South Africa and are looking to invest in offices there.The following information has been extracted from the reports relating to the project:

Investment R1 500 000
Average annual profit R450 000
Life span 5 years
Minimum required rate of return 15%
Net Cash flow’s:
1st year R550 000
2nd year R600 000
3rd year R680 000
4th year R700 000
5th year R780 000

Answer 1

The student's question is about evaluating an investment in Durban offices by calculating the Net Present Value using the provided cash flows and minimum required rate of return.

Step-by-step explanation:

The question you're asking pertains to the subject of Business, specifically within the realm of finance and investments. To evaluate whether the investment in Durban offices would meet Whema Ltd's financial criteria, various methods such as Net Present Value (NPV) and Internal Rate of Return (IRR) could be used. Using the provided data, the NPV can be calculated by discounting the net cash flows at the company's minimum required rate of return (15%) and subtracting the initial investment. Only by performing these calculations will Whema Ltd be able to determine if the potential investment in Durban provides a sufficient return.