Advertising costs to stimulate demand are expected to be RM350,000 in the first year of production and RM100,000 in the second year of production. No advertising costs are expected in the third and fourth years of production. Vista will be produced on a new production machine costing RM800,000. It will cost RM80,000 to modify it for special use by the firm and an additional RM20,000 to install the machine. Government legislation allows HOVID PLC to claim capital allowances will be on a straight-line basis over four years. Inflationary rate of 4% on direct material cost and 5% on other variable production cost