[luckypenny]

A council has given the go- ahead for a parking mall to be established alongside the square. The cost of the development will amount to $25 million. There will be 250 parking bay. The company undertaking the development intends charging a fixed charge of $ 2300 per bay per month for the first 10 years of use, and a fixed charge of $ 360 per bay per month indefinitely thereafter. Assume the $ 10 million is due immediately to the building contractor and the balance of $ 15 million is due completion of the mall in a year's time. The required rate of the return of the company is 21% per annum, interest compounded monthly. The on going operating cost per day will be $ 30 per month once the mall is completed. This operation cost is expected to increase by 1% per month indefinitely into the future due to inflation, ignore taxation

Question: use NPV analysis to determine whether the company should go ahead with the parking mall