Hansen plc introduced a new product (the Suarez) to its range last year. An existing machine, used to produce each Suarez, has created a bottleneck in the production process meaning that only a maximum 5,000 units can be manufactured per annum. The Suarez product has been a huge success in the market and all items manufactured are sold. The marketing department of Hansen plc has prepared the following demand forecast for future years following feedback from customers. Year Demand (units) 3 7,000 9,000 11,000 4,000 The directors of Hansen plc are now considering investing in a second machine that will allow the company to satisfy the excess demand. The following information relating to this investment proposal has now been prepared: Initial investment Maximum additional output $20,000 5,000 units Current selling price $50 per unit Variable operating costs $28 per unit Fixed operating costs Notes: $15,000 per year The variable operating costs only relate to the additional units produced. The fixed costs are those additional costs due to the purchase of the new machine. If production remained at 5,000 units, the current selling price would be expected to continue throughout the remainder of the life of the product. However, if production is increased, it is expected that the selling price will fall to $45 per unit for all units sold. Again, this will last for the remainder of the life of the product. No scrap value is expected at the end of four years, when production of the Suarez is planned to end. For investment appraisal purposes, Hansen pic uses a discount rate of 10% per year and has a target return on capital employed of 45% per year. Ignore taxation. Required a) Calculate the following values for the investment proposal: i. Net present value; ii. Accounting rate of return (based on initial investment): iii. Discounted payback period (Note: "discounted" not covered in the week 11 materials!). b) Discuss your findings in each section of (a) above and advise whether you think the investment proposal is financially acceptable