The current plant has a capacity of 25,000 cases per month. The first proposal is for a major expansion that would double the plants current capacity to 50,000 cases per month.

-Expanding the plant will require the purchase of $3.6 million in new equipment, and entail up-front design and enginering expenses of $3.9 million. These costs will be paid immediately when the expansion begins.

-Installing the new equipment and redesigning the plant to accommodate the higher capacity will require shutting down the plant for nine months. During that time, the plant's production will cease. After the expansion is finished, the plant will operate at double its original capacity.

-Marketing and selling the additional volume will lead to $1 million per year in additional sales, marketing, and administrative costs. These costs will begin in the first year(even while the plant is under construstion)

1) Determine the annual incremental free cash flow associated with each expansion proposal relative to the status quo( no expansion)

2. Compute the IRR and payback period of each expansion proposal.

3. Estimate Nanovo's equity cost of capital. Use it to determine the NPV.