Problem
Assume that you are financial analyst of Alpha Investments Pic based in Accra and you have been assigned to advise Mrs Joy Ohene about a house-building venture that she intends to embark on. Mrs Ohene can buy a plot of land for $120,000. In order to build a house on the land, she requires a further $120,000. The trend in the, Housing market strongly indicates that she would be able to sell the house for $300,000 in a year's time. According to the in-house database available at Alpha Investment Pic, a similar risk investment to Mrs Ohene's project would give her an expected return of 15 percent.
Task
a. Calculate the expected return from the house-building venture that Mrs. Chene intends to undertake.
b. Calculate the present value (PV) of the proceeds from the sale of the house.
c. Calculate the net present value of the project.