Question:
Mada Air Ltd is thinking of diversifying its activities in order to cope with the financial crisis. After careful evaluation its research and development team has proposed the following projects:
Projects Investments Required (€) NPV at 15%
Hotel 20 000 € 8000
Eco Tourism 40 000 € 28 000
Sea Cruise 35 000 € 37 500
Health Tourism 50 000 € 31 500
Catering 15 000 € 3500
The Eco Tourism and Health Tourism projects are mutually exclusive.
Required:
If the cost of capital is 15% and only €100,000 is available prepare an investment plan for Mada Air Ltd. Assume that all the projects are divisible.