=12. Use the Standard & Poor's Market Insight website

(www.mhhe.com/edumarketinsight) for this problem. Assume that Starbucks contemplates selling music online over a website, via existing wireless hotspots in its stores. The estimated initial investment in technology and cost of implementation is $36 million, and the expected net increase in annual after-tax cash flow is $4 million in the first year, growing 2 percent a year in perpetuity.

Management estimates that this project carries moderately more risk than Starbucks' average project, and believes that the project's risk is roughly comparable to that faced on typical investments made by Apple Computer Inc.