ZXY Company is a food product company. ZXY is considering expanding to two new products and a second production facility. The food products are staples with steady demands. The proposed expansion will require an investment of $7,000,000 for equipment with an assumed ten-year life, after which all equipment and other assets can be sold for an estimated $1,000,000. They will be renting the facility. ZXY requires a 12 percentreturn on investments. You have been asked to recommend whether or not to make the investment.

• Analysis of financial information.
• Identification of risks associated with the investment. Consider:
  • How risky the project appears.
  • How far off your estimates of revenues and expenses can be before your decision would change.
  • The difference if the company were to use a straight line versus a MACRS depreciation.
• Recommendation for a course of action.
• Explanation of criteria supporting your recommendation.