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Joes Ice Cream Bar is looking to expand into offering espresso to offset some of...

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Finance

  1. Joes Ice Cream Bar is looking to expand into offering espresso to offset some of the slumps during the winter months. The initial investment to purchase the commercial grade machine will cost $30,000. The loan to purchase the machine will cost 7.5%, so the required rate of return is at least 7.5%.

Below are the estimated revenues expected over the next 5 years from the machine:

Year 1 - $6,250 Year 2 - $7,500 Year 3 - $8,500 Year 4 - $8,500 Year 5 - $8,000

Calculate the NPV using Excel. Is this a worthwhile investment? Why or why not? (Show all formulas/calculations)

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