Controller of monpello distillery

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The vice president of sales believes that Monpello Distillery should expand it's manufacturing capacity into Brazil to take advantage of the burgeoning demand for it's newest beverage.

The factory will cost $10 million and will be purchased in Year 0. It will last 7 years and can be sold in year 7 for $3 million. Sales will be $3 million per year beginning in year 1 and will last 7 years. Expenses other than depreciation will be $1 million per year beginning in year 1. Net Working Capital of $600,000 is required in year 1 but will be recovered at the end of year 7. The tax rate is 30%.

Your required return is 8%. As controller of Monpello Distillery, what would you suggest they do?

Reference no: EM131500708

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