Freeze a Canadian manufacturer of air conditioning units with multiple production locations across the country. The company is currently attempting to determine whether, or not they want to start manufacturing high efficiency air conditioning units to sell to customers. So far, the company has spent $200,000 in R&D salaries to design a new product. From those R&D results, management is trying to determine if they should continue to go forward with this new product line. Management estimates that new machinery costing \$1,000,000 will need to be acquired to manufacture these new high efficiency units. Specifications for the high efficiency unit (named FI-1000) were designed using specifications from an already existing product being manufactured by the company langle F|-500 Cost information for the FI-500 is indicated below: Sell Price=\$2,500 pe unit Direct Materials = 50% of sell price Direct abour=10\% of sell price Variable Manufacturing Overhead=\$18 per unit Current Marketing Spend per year=\$50,000 Current demand = 4.450unit per year Work from the R&D team indicate that with a more efficient air conditioning unitmaterial costs for the new Fl-1000 will decrease by 10% per unit compared to the F1-500, and direct labour will decrease in costs by 7.5% per unit compared to the FI-500 Information from the marketing team indicate that Freeze It! will need to advertise heavily for the F1-1000 in the first year of sales and that amount is expected to be $100,000 . Advertising for the F1-1000 after the first year will be $50,000 per year. Also because of competition the new Fl-1000 will need to have a sell price at 5% less than the current F|-500 unit to be attractive to customers . Further, with this pricing structure in place for the Fl -1000, marketing is indicating that a 5% increase in units sold versus the FI-500 should be seen as customers are becoming more concerned about the environment and want to replace their old air conditioning units at a reasonable cost . Management determines that this new product should be sold for 10 years before a new generation of product needs to be designed Freeze It's overall rate of return for the company is 15 %. The CCA rate for the machine to be purchased is 30% and the company's tax rate is 20% Should Freeze It! go forward with investing in this new product line Fl - 1000 or should Freeze ! just continue to produce the -500