Omicron Ltd produces a range of garden tools. Recently, it has realized an updatedversion of a classic "Omicron" product and the directors of the company are nowconsidering whether this product should be put into production. The followinginformation has been produced to help evaluate the commercial viability of the newproduct.Theresearch was$-0000.$ In addition, marketnsultants at a cost of C$80,000.$The development costs have all been paid and the market rescarch costs are duefor payment next month.of deve$2.$ The company expects to sell $10,000$ units per year for each of the next flveyears. The selling price per unit will be $70\mathrm{.}3.$ Machinery which originally cost $1,500,000$ and which has a written down valueof $950,000$ will be required to produce new garden tools. If production doesnot go ahead, the machinery will be sold immediately for $840,000.$ If$,$ however,production gocs ahead, the machinery will be sold at the end of five years for$50,000.$the new proauc$4.$ Additional working capital of $150,000$ will be required immediately in order toPPoaueon of the new product. This can be released aTo produce the new product, two of material will be required. Type Amaterial is used throughout the product range of the business and $20,000$ kilosare already in stock at a purchase cost of $$l$4$ per kilo. Recently, however, thesupplier of the material has raised the price to $1$s per kilo. Type B material isalso in stock although there is no further use for this material except for use inthe produetion of the new product. There are $12,000$ kilos in stock at apurchase cost of $2$ per kilo; however, the replacement cost is $2\mathrm{.}50$ per kilo. Ifof Type B material.Assume cash flows occC$6.$ Labour costs are cstimated at $14$ per unit. If the new product is not producedsome existing employces will be made redundant immediately at a cost of$50,000$ to the company. If$,$ however, the new produet is produced, theseemployces will be used to produce the new product and will be made redundantat the cnd of the production period at a cost of $80,000$ to the company.otherwise. TaxationRequired:unit quires one kilo of Type A materials$7.$ Total fixed costs apportioned to the new product will be $200,000$ per annun ofwhich $70,000$ per annum is estimated to arise as a direct result of the decisionto produce the new product$\mathrm{.}8.$ The company has a cost of capital of $12\%$ per year.Smethreethe end of the year concerned unless indicatcdignored.$($a$)$ Advise the directors of Omicron Ltd whether or not the company shouldproduce and sell the new type of garden tools using the net present valueD metnod of mvestment appraisal. Present your main calculation in atable, with a column for each year.$(16$ marks$)($b$)$ Evaluate the use of the nct present aluc $($NPV$),$ internal rate of return $($IRR$),$Payback anproduetion docs not go nhead, te exinnnd accounting rate of return $($ARR$)$ methods of capital investmentappraisal.