Financial managment for small business

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You are a small business owner and you have the opportunity to expand your facility, which will increase your production capacity over the next 5 years.  The expansion will cost $60,000 and additional equipment will cost another $20,000.

Required:

  • Additional profits after tax will amount to $18,000 per year.  Your cost of capital is 8%.  Should you go ahead with the expansion?  Why or why not?  HINT: Use NPV.

 
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