Bonnie plc is a large toy manufacturer that has recently been approached by the owners of the patent of a new toy that has become extremely popular in Asia. They have offered Bonnie plc exclusive rights to make and distribute the toy in Asia for an immediate payment of 3.2 million and a royalty payment of 1 for each toy produced and sold. To assess the feasibility of the offer, Bonnie plc appointed a specialist firm of marketing consultants, at a cost of 0.5 million, to provide a report on the market potential of the new toy in Asia. The report, which has just been produced, concluded that Bonnie plc could sell the new toy for 9 each and that 400,000 toys could be sold each year during its anticipated four-year life. To produce the toy, equipment costing 1 million would be required immediately: this would have a residual value at the end of four years of 0.5 million. The variable costs of production (excluding the royalty payments) are expected to be 3.25 per unit and the fixed costs (excluding depreciation) are expected to be 1.2 million per year. Half of these fixed costs have been apportioned to the new product based on a 'fair share' of the fixed costs relating to the company as a whole and half directly relate to the production of the new toy. Bonnie plc believes that a suitable discount rate for this project is 10%. Ignore taxation and work in millions. Required: (a) Calculate the net present value (NPV) for Bonnie plc of producing and selling the new toy and comment on the information contained in your answers