a) NPV Calculations:

i) NPV of Option 1:

• Cash inflows (weighted average):
  Year 1–10: GH¢ 2.470 billion
• Cash outflows:
  Initial outlay: GH¢ 2 billion
  Additional investment (Year 1): GH¢ 0.732 billion
• NPV = GH¢ 2.470 billion – GH¢ 2.732 billion = (GH¢ 0.262 billion) (Negative NPV)

ii) NPV of Option 2:

• Cash inflows:
  Year 1–5: GH¢ 1.345 billion
  Year 6–10: GH¢ 0.677 billion
• Cash outflows:
  Initial outlay: GH¢ 3 billion
• NPV = (GH¢ 1.345 billion + GH¢ 0.677 billion) – GH¢ 3 billion = (GH¢ 0.978 billion) (Negative NPV)

iii) NPV for the worst-case outcome (Option 1):

• Worst-case cash inflows: GH¢ 1.520 billion
• Cash outflows: GH¢ 2.732 billion
• NPV = GH¢ 1.520 billion – GH¢ 2.732 billion = (GH¢ 1.212 billion) (Negative NPV)

b) Potential Benefits and Difficulties:

Option 1:

• Benefits:
  1. Entry into a new, high-margin market with minimal competition in Nigeria.
  2. Expansion aligns with HPC’s strategic goals of regional growth.
  3. Potential long-term market leadership in Nigeria.
• Difficulties:
  1. Uncertainty in projected cash flows, particularly in a new market.
  2. High upfront capital investment with negative NPV, making it financially risky.

Option 2:

• Benefits:
  1. Potential to dominate the retail market in Togo with growing demand for fruit juice.
  2. Possibility to leverage the government’s forecast for mall developments and urban growth.
• Difficulties:
  1. Established competitors in Togo may pose a significant barrier to market entry.
  2. Higher initial capital outlay with negative NPV, which poses a substantial financial risk.

Profitability Index:

• Option 1: (GH¢ 2.470 billion / GH¢ 2.732 billion) = 0.90
• Option 2: (GH¢ 2.022 billion / GH¢ 3 billion) = 0.67
  Both options show a profitability index of less than 1, indicating that they are not financially viable under the given assumptions.