es Acado groceries is considering expanding its production capacity by investing in novel grocery packing robots. Since its inception, Acado has instead relied on employees to pack the groceries. The cost of these robots is $2.75 million. Unfortunately, programming these robots will take several months and will partially disrupt production. The firm has just completed a $50,000 feasibility study to analyse the decision to buy the grocery packing robots, resulting in the following estimates: . Operations: Once the robots are operating next year, the extra capacity is expected to generate $13.2 million per year in additional sales, which will continue for the 5-year life of the robots. The disruption caused by the programming of the robots will decrease sales by $5 million this year. The cost of goods sold is 70% of their sale price. The increased production will require additional inventory on hand of $1 million to be added in year 0. The inventory will go back to its original level in year 5. Human Resources: The expansion will require net additional sales and administrative personnel at a cost of $2 million per year. Accounting: The robots will be depreciated via the straight-line method over their 5-year life. The firm expects receivables from the new sales to be 15% of revenues and payables to be 10% of the cost of goods sold. Acado's marginal corporate tax rate is 35%. Suppose that Acado has an equity cost of capital of 10%, market capitalization of $10.8 billion, an enterprise value of $14.4 billion, and a debt cost of capital of 6.1%. Assume also that the asset beta for the packing robots industry is 1.67, the risk-free rate is 5% and the expected return on the market is 11%. 64% + 1:1 Suppose that Acado can finance $2.00 million of the cost of the robots by raising debt. The firm plans to pay 7% in interest each year for the next 5 years, and then repay the principal of $2.00 million in year 5. c) [10 marks] What is the value of investing in packing robots, including the additional cash-flow from financing the project with debt? Should Acado invest in the packing robots? Explain your assumptions regarding the opportunity cost you use to estimate the present value of the additional cash-flow from financing the project with debt.