A medium sized company is looking to expand its operations and has narrowed its options to two property alternatives. The alternatives have the following net cash flow (below) and the company's current cost of capital is 10% (please ignore taxation).
|
Year
|
Property 1
|
Property 2
|
|
|
£000s
|
£000s
|
|
0
|
(2,500)
|
(2,750)
|
|
1
|
1,000
|
900
|
|
2
|
500
|
700
|
|
3
|
600
|
800
|
|
4
|
1,000
|
600
|
|
5
|
900
|
700
|
By calculating NPV, IRR and PP (show all calculations on excel sheet) advise which option should be taken and say why compared to the other methods.
In addition to your quantitative analysis explain what other qualitative factors should be taken into account when making a final decision?