JGBS Limited is considering a new project. The project will cost R$ 10,000. It will generate cashflow over next 3 years of Rs3,500, Rs4,500 and Rs5,500 as summarised in the table below -

Year

Initial vear

Year 1

Year 2

Year 3

Cashflow (Rs)

-10,000 3,500

4,500

5,500

1. When the CFO went to discuss the project with the CEO, the CFO was of the opinion that they should go ahead with the project if it had a positive NPV at the cost of financing the project which he calculated as 12% pa. because that would add to the value of the company. What is the NPV for the project?
2. The CEO told the CFO that he does not understand NPV. Since it is a new project, he wanted that it should earn at least 15% p.a. He wanted to know the return from the project. What is the measure that the CEO wants to know? Compute it (approximate value is acceptable, show your steps and workings).