Question
1. The Expresso Roast Corporation (ERC) is considering expanding its product lines by investing in Mellow-Man Tea.. The companys founder is obscenely wealthy and will
1. The Expresso Roast Corporation (ERC) is considering expanding its product lines by investing in Mellow-Man Tea.. The companys founder is obscenely wealthy and will operate these lines for only one year before retiring and will therefore use only a one-year planning horizon. . Mellow-Man Tea has a cost of $80,000 and is expected to produce benefits of $65,000. While this line is not as immediately profitable as the other alternative, it is estimated that this line could be sold upon the founders retirement in one year for $20,000. The health benefits of tea make this a less risky investment and ERCs CFO has recommended a risk-premium of 10%. All future cash benefits will occur at the end of the year. The rate of return on US T-Bills is 4%. Using NPV analysis, should the company make the investment? Do not use "$" or comma. Just type in your numeric answer only
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