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The Acme Battery Manufacturing Company has a rapidly growing product line that requires two work centers, X and Y for manufacture. Work Center X has

The Acme Battery Manufacturing Company has a rapidly growing product line that requires two work centers, X and Y for manufacture. Work Center X has a current capacity of 30,000 units per year, and Work Center Y is capable of 50,000 units per year, totaling capacity of 80,000 units per year on the product line. This year (year 0), sales of the product line are expected to reach 80,000 units. Growth is projected at an additional 20,000 units each year through year 3. Pre-tax profits are expected to be $10 per unit throughout the 3-year planning period. Two alternatives are being considered:
1) Expand both Work Centers X and Y at the end of year 0 to a capacity of 60,000 units per year each, at a total cost for both Work Centers of $500,000;
2) Expand Work Center X at the end of year 0 to 50,000 units per year, matching Work Center Y, at a cost of $300,000, then expanding both Work Centers to 70,000 units per year each at the end of year 2, at an additional cost at that time of $350,000.
The Company will not consider projects that don't show a 3rd year positive net present value using a discount rate of 10%.
What is the net present value (NPV) of the pre-tax cash flow for alternative #1 compared to the base case of doing nothing for the next three years?
What is the net present value (NPV) of the pre-tax cash flow for alternative #2 compared to the base case of doing nothing for the next three years?
What action, if any, should the Acme Company take?
Details Please- how do you calculate NPV?

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