Answer 4 questions based off of 2 proposals using logic and excel

1.Determine the annual incremental free cash flow associated with each expansion proposal relative to the status quo (no expansion).

2.Compute the IRR and payback period of each expansion proposal. Which plan has a higher IRR? Which has a shorter payback period?

3.Estimate Nanovos equity cost of capital. Use it to determine the NPV associated with each expansion proposal. Which plan has a higher NPV?

4.Should Nanovo expand the plant? If so, which proposal should Nanovo adopt? Explain

Proposal 1 The current plant has a capacity of 30,000 cases per month. The first proposal is for a major expansion that would double the plant's current capacity to 60,000 cases per month. After talking with the firm's design engineers, sales managers, and plant operators, you have prepared the following estimates: . Expanding the plant will require the purchase of $4.0 million in new equipment, and entail up-front design and engineering expenses of $4.2 million. These costs will be paid immediately when the expansion begins. Installing the new equipment and redesigning the plant to accommodate the higher capacity will require shutting down the plant for nine months. During that time, the plant's production will cease. After the expansion is finished, the plant will operate at double its original capacity. Marketing and selling the additional volume will lead to $1.2 million per year in additional sales, marketing, and administrative costs These costs will begin in the first year (even while the plant is under construction and shut down). Proposal 1 The current plant has a capacity of 30,000 cases per month. The first proposal is for a major expansion that would double the plant's current capacity to 60,000 cases per month. After talking with the firm's design engineers, sales managers, and plant operators, you have prepared the following estimates: . Expanding the plant will require the purchase of $4.0 million in new equipment, and entail up-front design and engineering expenses of $4.2 million. These costs will be paid immediately when the expansion begins. Installing the new equipment and redesigning the plant to accommodate the higher capacity will require shutting down the plant for nine months. During that time, the plant's production will cease. After the expansion is finished, the plant will operate at double its original capacity. Marketing and selling the additional volume will lead to $1.2 million per year in additional sales, marketing, and administrative costs These costs will begin in the first year (even while the plant is under construction and shut down)