$1.$ PolyNovo Limited $($hereafter known as $$PolyNovo$)$ ordinary shares are listed on the Australian Securities Exchange $($ASX$).$ At the PolyNovo $2023$ Annual General Meeting

$($AGM$)$ held on $3$ November, $2023$ they revealed plans to construct a new manufacturing facility adjacent to its existing facility. PolyNovo has already performed a substantial amount of design analysis related to the new facility at a cost of $$70,000.$ The capital expenditure of

$$845,000$ associated with the construction of the new facility and the annual operating expenses are substantial. Therefore, before PolyNovo commits to building the new facility a financial analysis is needed to determine if it is providing $$superior results for our

shareholders$.$

$2.$ The capital cost of the new facility is expected to be $$845,000$ today. PolyNovo must also purchase $$300,000$ of plant and equipment $($P&E$).$ At the end of FY$23$ PolyNovo had $$$$46\mathrm{.}8$m of cash on hand$$ and it plans to use $$0\mathrm{.}3$ million of their cash balance to pay for the building which will reduce the capital cost to just $$545,000.$ If the new facility is built, a piece of obsolete manufacturing equipment must be sold. The equipment had a total capital cost in $2020$ of $$220,000$ and is being depreciated at $$11,000$ per annum for the years $2021$ to $2030$ inclusive. The equipment can be sold today for $$180,000$ and PolyNovo will use the entire sale proceeds to distribute a $$180,000$ dividend to its shareholders today $.$

$3.$ As stated in the speech delivered to shareholders at PolyNovo$$s AGM, the recently$-$ received FDA clearance will substantially improve the sales opportunities for their products. While the expenses associated with preparing the FDA application have already been paid, there is debate among management about whether the $$60,000$ tax$-$deductible amount should be included as a cash outflow in the year $2024.$

$4.$ PolyNovo plans to commence construction of the new facility in the year $2024$ and it is $$scheduled for completion in CY$26.$ Therefore, the first year of cash sales in $2026$ are anticipated to be $$800,000.$ Management forecasts that with ongoing endorsement from surgeons that a sales growth rate of $3\mathrm{.}50\%$ p$.$a$.$ can be sustained for the foreseeable future.

$5.$ At the $2023$ AGM, PolyNovo referred to $$Total FY$23$ revenue of $$66\mathrm{.}5$m$.$ Furthermore, they outlined a clear path to profitability and in $2023$ appointed a new Chief Information Officer $($CIO$)$ at an annual salary of $$395,000$ to manage the introduction of multiple new information systems across PolyNovo$$s existing operations.

$6.$ Starting in $2024,$ employees at the new facility will receive annual training. PolyNovo performs all training in$-$house using a dedicated centre that was built in $2021$ for $$2$ million. For the foreseeable future PolyNovo expected the centre to be underutilised and so they are renting out part of the centre to third party for a fee of $$64,000$ p$.$a$.$ However, if the new facility proceeds, PolyNovo must cancel the external rental agreement today $($at no cost$)$ and will utilise the entire training centre. The accounts department recommends the $$64,000$ rental fee be ignored from the analysis because it is not an internal cash flow.

$7.$ For cost accounting purposes PolyNovo must allocate overheads across each business unit. Therefore, it is proposed that the new facility be charged $$25,000$ of the head office costs of $$118,000$ p$.$a$.$

$8.$ Annual variable cash costs at the new facility are expected to be $63\%$ of each year$$s cash sales. Because the new facility is co$-$located adjacent to an existing facility, it will incur annual fixed operating costs of $$37,000$ compared to annual fixed costs of $$466,000$ at the existing facility. The current sales team have a total annual salary package of $$332,000$ and if the new facility is built their roles will be expanded to include sales and marketing responsibility for the new facility$$s products. All costs associated with the new facility are incurred once sales commence, unless stated otherwise.

$9.$ PolyNovo will perform the financial analysis of the new facility over a ten$-$year period. The Australian Taxation Office $($ATO$)$ confirms that for tax purposes the new facility has a twenty$-$five$-$year life and the new P&E has an eight$-$year tax life. In PolyNovo$$s experience, P&E can be operated effectively for a full ten years before they need replacing. PolyNovo$$s management accountants depreciate all assets over an operational six$-$year life. While the new facility$$s first cash sales occur in $2026,$ construction commences today and thus any associated assets$$ depreciation expense begins in $2025.$

$10.$ PolyNovo will borrow $$200,000$ today to partly finance the new facility. The ten$-$year interest$-$only loan has annual interest repayments of $$14,000($assuming a $7\%$ p$.$a$.$ rate$).$ PolyNovo $$s accountant confirms that interest payments are classified as a business expense and are therefor

Present an itemised breakdown $($and the total$)$ for each of the following:

$1.$ The cash flows at the start.