Identifying incremental costs for products involving pilot studies) Aero Manufacturing Company is working on a new version of its tried and true wind powered water pump For 15 years the firm had manufactured replacement parts for older-shole windmill used on farms and ranches throughout the Southwest However, in die pumpa required the mode and leather seals that would we out over time and require servicing When Acres owners initiated the design of a new pumping process, they aplored a number of possible designs and spent over $100,000 to fabricate and test the new design before perfecting the system that they are now ready to place into production and begin marketing to manufacture the new pumps, Aero will have to spend $650,000 on new equipment plus $150.000 on advertising and promotion for the launch of the new product. These expenditures will take place atyw-end 2016 a. What is the relevant initial cost of the new pump product? b. Aero's management expects to sell 2000 of the new units per year for the next 15 years and these units will producere cash low for ero of 170,000 per year Furthermorethe management estimates that the equipment purchased initially will last for the full 15 years at which time will have no savage value in Aaro uses a rate of return of percent to evaluate it investments, what is the NPV of the new pump investment? c. Just as Aero's management was about to launch the new investment, the tems owner got a call from the A1 Windmill Company from Cross-Plains, Nebraska, inquining about the possible purchase of the product design patent The caller suggested that his company would be interested in paying as much as 5630,000 for the end rights to the new techno Aero would have to sign over all of its riants to the new desion in return for the oament How should this offer influence Aco's decision to manustacturing the new sume desion b. Aero's management expects to sell 2.000 of the new units per year for the next 15 years and these units will produce free cash flow for Auto of 170.000 per year Furthermore, the firm's management estimates that the equipment purchased initially will last for the full 15 years, of which time it will have no salvage value of Aero uses a rate of return of percent to wait investments, what is the NPV of the new pump investment? C. Just as Aero's management was about to launch the new investment the firm's owner got a call from the A1 Windmill Company from Cross-Plan, Nebraska, inguring about the possible purchase of the product design patent The caller suggested that his company would be interested in paying as much as $530,000 for the exclusive right to the new technology Aero would have to sign over all of its rights to the new design in return for the parent How should his offerinfuence Aero's decision to inisiate maoutchining the new pume design? a. The relevant initial cost of the new pump product is SB00000 (Raund to the nearest dollar) b. The NPV of the new pump investment is Round to the nearest dolar) C. Aero sell the patent and commence manutacturing the new design because the payment is than the projects NPV Soled to the drop-down Enter your answer in each of the answer boxes