[jovanite]

I hv solved the problem using relevant costing. In relevant costing, initial investments are to be ignored so I ignored cost of capital and inflation rate. Later in investment appraisal, teacher told us to calculate discount factor using cost of capital and include this in net cash flow. Kindly advise whether my solved method is correct and complete or I should include the last statement as well? Question and my working is attached.

[paraclete]

Cannot say whether your methodology is correct as it is somewhat convoluted however based on your results I would say the investment has adequate returns