Sammys snow shack sells shave ice from a small and cramped building. With the current equipment and facilities, they sold 1,000 cups per week last year and have been seeing consistent growth of 3% per year. Sammy believes the volume growth is based on his decision to increase marketing activities a few years ago. Sammy issued coupons for 50% off one item. Last year 300 coupons were redeemed each week and Sammy expects that number to increase by 10% per year. The average price of a cup of shave ice is $6.00 (that is before any coupons or other discounts are applied). The cost of each cup includes $0.40 in ice, $0.80 in syrups and toppings, and $0.20 for the cup and spoon. In addition to these costs, Sammys pays 20% of his net revenue in rent. He pays 2 employees $10/hour to operate the shop which is open 6 hours every day and is open 5 days each week. He paid $36,000 to build his shack 3 years ago which is being depreciated on a straight-line basis over 6 years but Sammy believes it will last for about 5 more years. The ice-shaver machine currently in the shed was also purchased 3 years ago at a cost of $6,000 and is also being depreciated on a straight-line basis over 6 years to a salvage value of zero. Sammy believes that equipment could be used for 5 more years at which time it would need to be replaced. The tax rate is 21%.

Sammy is considering building an ice storage shed adjacent to his building which would free up space inside his building. The additional space would create room to add a larger, higher- capacity ice-shaving machine which would cost $8,000 and require one more employee to operate. The machine would be depreciated to a salvage value of 0 over 5 years, when it would be used up and worthless. If Sammy does the expansion and buys a new shaver, the existing ice shaving machine could be sold for $1,000. The ice storage shed would cost $15,000 and last for 5 years. It will be depreciated on a straight-line basis over 5 years and be worthless at that point. The benefit of adding this machine would be to increase sales by 30% (over the existing projection). Prices would not change, but he expects the coupon redemptions to grow by 50% over the current level. The storage of ice in the ice shed rather than inside the building would cause increased loss from ice melt and increase the unit cost of ice by 20%.

Assume a WACC of 15%, should Sammy build the storage shed and get the new ice shaver?

Please show work. Thank you.