Mr Novello has taken out a lease on a small factory outlet for a deposit of $7,000. There is an additional rent payable of $6,500 per annum. If the lease is terminated, Mr Novello would have to forfeit the initial deposit of $7,000. Mr Novello intends to use the factory outlet to sell his newly patented automated dog groomer, and has estimated operations for the next 12 months to be as follows: E E Sales 138,000 Less Value-added tax (VAT) 18,000 Sales less VAT 120,000 Cost of goods sold 65,000 Wages and wage-related costs 19,000 Rent including the deposit 13,500 Rates, heating, lighting and insurance 15,000 Audit, legal and general expenses 3,200 115,700 Net profit before tax 4,300 In the figures no provision has been made for Mr Novello's salary but it is estimated that one half of his time will be devoted to the business. He is undecided whether to continue with his plans because he knows that he can sublet the factory to another business for a monthly rent of f600 per month if he does not use it himself. i. Identify and explain the 'sunk' and 'opportunity' costs in the example of Mr Novello above. ii. State what decision Mr Novello should make, according to the information given, and supporting your conclusion with a financial statement