Key Topics: Investment appraisal, risk analysis, and production capacity expansion.

Models Covered: Net Present Value (NPV), Internal Rate of Return (IRR), sensitivity analysis, and probability analysis.

Description: This case explores the financial and operational feasibility of purchasing new machinery to meet increasing demand for Duo Co’s product. The analysis includes calculating the NPV and IRR of the proposed investment, highlighting the acceptability of the project. It also discusses the distinction between risk and uncertainty, and how tools like sensitivity and probability analyses can integrate risk into the appraisal process.