Central Telephone Company is considering the addition of a new type of call-waiting service for its customers. The service can be offered with present hardware, but new software must be purchased at a cost of $1 million. The software will be placed in service on January 1, 2022, and depreciated over the estimated 5-year life, using the straight-line method. Yearly fees for the service will be $36.7 initially and will increase 5 percent a year thereafter. An estimated 9177 customers will sign up for the service in the first 2 year, with the number increasing at 4 percent a year thereafter. The advertising expense for the service will be $100,000 at the time of introduction and $60,000 a year thereafter with standard deviation of 12,000 a year, year to year advertising expenses is uncorrelated. The only variable cost will be bad debt expense, equal to 1 percent of revenue. Because of the uncertainty about developing technology, management wants to assume that the service will not be offered after the 5-year life of the existing hardware. The telephone company has a 12 percent required rate of return. The company has paid high tax in recent years and is exempted from tax for this project. 

Is the call-waiting service an attractive offering?