A 70 year old man, retired, widow with 2 children, has won 600.000 € in the lottery. He has decided to give half of this money to each son. The oldest who always dreamt about having his own business, has decided to invest the money as capital in a company dedicated to buying and selling art and after doing the corresponding market study the 5 yeAr Forecast indicates the following FNC ( net cash flow): 25.000€, 100.000€, 150.000€, 100.000€ and 75.000€.
The younger brother, more unsure and prudent has decided to open two businesses, assigning each one half of the money.
With the first 150.000€, he wants to buy a small apartment and rent it out during 15 years. He knows that the rent in the area where he wants to invest IS 1.500 € a month.
With the remaining 150.000€, he will try with a health food store in the city center, he Forecasts during the first 10 years the following FNC: -10.000€, -10.000€, -5.000€, -25.000€, 50.000€, 75.0000€, 125.000€, 175.000€, 150.000€ and 125.000€.
Calculate pay-back and VAN ( net present value) OF all the projects and give your opinión of the results
Take into account that there IS no taxation and that the rate is 1,20%