Mandarin Ltd. is currently considering starting a new line of business. Since the risk profile of this new business line is quite different from that of its current business, Mandarin has decided to use a cost of capital of 9% in assessing the viability of the new business line. Mandarin has also decided to use a 7-year planning horizon, which coincides with the projected useful life of the production equipment required for the new business. To start the business, Mandarin will need to spend $8 million on new production equipment. Management estimates that the equipment will have a salvage value of $1.5 million at the end of its useful life. The applicable CCA rate on the production equipment is 10%. Mandarin intends to run the new business using half of the building where it is operating its current business. The space designated for the new business is currently unused. The new business will also require an additional investment in net working capital of $150,000. As a part of its business plan, management has generated the following projections for revenues and costs for the new business: Year 1 Year 2 Years 37 Revenues COGS Gross Profit $9,000,000 (6,000,000) $3,000,000 $11,500,000 (7,500,000) $4,000,000 $13,000,000 (8,400,000) $4,600,000 Assuming that Mandarin's marginal tax rate is 25%, determine whether Mandarin should start the new business line using the net present value (NPV) method. (4 marks)