Hoosier Craft, Inc. is a producer of all-purpose fishing boats. Its current line of fishing boats are selling excellently. However, in order to cope with the foreseeable competition with other similar fishing boats, HC spent $4,500,000 to develop a new line of deluxe fishing boats with a deeperangled hull and higher sides. The model has a more power-efficient tiller on its gasoline outboard motor as well as an electric trolling motor located at the bow besides the outboard. This new trolling motor makes it much more easily and quickly to go from place to place. Moreover, the new model has a built-in top of the line fishfinder GPS combo and a heavy duty bimini top. The company had also spent a further $1,200,000 to study the marketability of this new line of fishing boats. HC is able to produce the new fishing boats at a variable cost of $22,500 each. The total fixed costs for the operation are expected to be $5,000,000 per year. HC expects to sell 30,000 boats, 32,000 boats, 18,000 boats, 14,500 boats and 11,000 boats of the new model per year over the next five years respectively. The new fishing boats will be selling at a price of $28,500 each. To launch this new line of production, HC needs to invest $55,000,000 in equipment which will be depreciated on a seven-year MACRS schedule. The value of the used equipment is expected to be worth $3,500,000 as at the end of the 5 year project life. HC is planning to stop producing the existing fishing boat model entirely in two years. Should HC not introduce the new fishing boat model, sales per year of the existing fishing boats will be 19,000 boats and 13,500 boats for the next two years respectively. The existing fishing boat model can be produced at variable costs of $19,600 each and total fixed costs of $4,000,000 per year. The existing fishing boats are selling for $23,200 each. If HC produces the new fishing boats, sales of existing fishing boats will be eroded by 6,000 boats for next year and 4,500 boats for the year after next. In addition, to promote sales of the existing fishing boats alongside with the new fishing boats, HC has to reduce the price of the existing fishing boats to $19,600 each. Net working capital for the new fishing boat project will be 25 percent of sales and will vary with the occurrence of the cash flows. As such, there will be no initial NWC required. The first change in NWC is expected to occur in year 1 according to the sales of the year. HC is currently in the tax bracket of 35 percent and it requires a 16 percent returns on all of its projects. You have just been hired by HC as a financial consultant to advise them on this new fishing boat project. You are expected to provide answers to the following questions to their management by their next meeting which is scheduled sometime next month. 1. What is/are the sunk cost(s) for this new fishing boat project? Briefly explain. You have to tell what sunk cost is and the amount of the total sunk cost(s). In addition, you have to advise HC on how to handle such cost(s).