**QUESTION**

You are working for Amandla (Pty) Ltd. Amandla rents out office space to different small businesses at a monthly rate in an office building that it owns. Amandla’s directors are considering investing in a solar system to address the electricity supply problems that its tenants currently have to deal with. The purchase of the solar system will result in an increase in the monthly rent of all the occupants of the building. The directors asked you to assist them to decide whether they should purchase the solar system. You have the following information at your disposal: • The cost price for the solar system is R380 000. • The total monthly rental invoices will increase to R8 000 per month for the first year and thereafter the rent will be increased by 10% per year. • The company’s weighted average cost of capital is 14%. • The directors will consider reinvestment after 5 years. Required: Note: Round off all calculations to the nearest rand. Calculate the net present value of the solar system and advise the directors whether they should invest in this system or not.