Farbuck's Tea Shops is thinking about opening another tea shop. The incremental cash flow (not including the working capital investment) for the first five years is as follows:

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Initial capital

cost=$3,500,000

Operating cash flow for each

year=$1,000,000

Recovery of capital assets after five

years=$240,000

The hurdle rate for this project is

13%.

If the initial cost of working capital is

$490,000

for items such as teapots, teacups, saucers, and napkins, should Farbuck's open this new shop if it will be in business for only five years? What is the most it can invest in working capital and still have a positive net present value?