Posted by
**liza** on
.

A company wants to build a new factory for increased capacity. Using the net present value (NPV) method of capital budgeting, determine the proposal’s appropriateness and economic viability with the following information:

• Building a new factory will increase capacity by 30%.

• The current capacity is $10 million of sales with a 5% profit margin.

• The factory costs $10 million to build.

• The new capacity will meet the company’s needs for 10 years.

• The factory is worth $14 million over 10 years.