. Expanding a Product Line. Ghafari Brothers Company makes office equipment, such as tables, desks, computer equipment consoles, and work tables. The sales manager is trying to decide whether to expand the relatively new computer equipment console product line. The average desk will sell for \(\$ 300\) and has a variable cost of \(\$ 140\) per unit. Volume is expected to be 4,000 units per year for five years. To make the desks, the firm will have to buy additional machinery that will cost \(\$ 900,000\), has a 5 -year life, and has a \(\$ 100,000\) salvage value net of taxes. Straightline depreciation is used, and salvage value is ignored in depreciation calculations. Additional fixed cash operating costs will be \(\$ 200,000\) per year. Ghafari has a 40 percent tax rate, and its cost of capital is 16 percent.

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1. Using NPV, determine whether the computer console line should be expanded.

2. Compute the payback period.

3. Determine the approximate IRR that the firm expects to earn on the investment. Ignore salvage value.