What is the npv of this expansion project

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a. What is the NPV of this expansion project? Should GSB purchase the new machine?

b. Suppose GSB's required rate of return is 12 percent rather than 10 percent. Should the new machine be purchased in this case?

c. Should GSB purchase the new machine if it is expected to be used for only five years and then sold for $31,250? (Note that the model is set up to handle a five-year life; you need enter only the new life and salvage value.)

d. Would the machine be profitable if revenues increased by only $105,000 per year? Assume everything else is as originally presented and evaluated in part a.

e. Suppose that revenues rose by $125,000 but expenses rose by $65,000. Would the machine be acceptable under these conditions? Assume a 10-year project life and a salvage value of $12,500.

Reference no: EM131466560

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