Alkaji Dan Bacheka, an investor with his own equity capital of N20,000,000 (Twenty Million Naira) wishes to invest in one of two mutually exclusive real estate projects A and Y. Project X is in Asokoro District of Alkuja and Project Y is in Treasure Estate, Port Harcourt. The net income flows for each of the projects are estimated as follows:
| Year | Project X (N’000) | Project Y (N’000) |
|---|---|---|
| 1 | 6,000 | 5,000 |
| 2 | 6,000 | 3,500 |
| 3 | 6,000 | 4,000 |
| 4 | 6,000 | 6,000 |
| 5 | 7,000 | 7,000 |
| 6 | 8,000 | 8,000 |
| 7 | 5,000 | 5,000 |
| 8 | 5,000 | 4,000 |
| 9 | 4,500 | 2,000 |
| 10 | 4,500 | 2,000 |
Assuming a discount rate of 25% on each of the projects, calculate the Net Present Value of the projects and use them to advise the investor on which of the projects to invest in with reasons.
