J. Morgan of SparkPlug Incorporated has been approached to take over a production facility from B.R. Machine Company. The acquisition will cost $3,030,000, and the after-tax net cash inflows will be $465,500 per year for 12 years. SparkPlug currently uses 8% as its after-tax cost of capital. Tom Morgan, production manager, is very much in favor of the investment. He argues that the total after-tax net cash inflows is more than the cost of the investment, even if the demand for the product is somewhat uncertain. The project will pay for itself even if the demand is only half the projected level. Cindy Morgan (corporate controller) believes that the cost of capital should be 11% because