Please Solve it ASAP with all the requirements given below.

Bryson plc is a multi-product manufacturer operating several plants and factories based in the north of England. After a long period of sustained growth, Bryson plcs results have begun to stagnate over recent years with static or declining sales in several of its existing product ranges.

It is the last quarter of 2021. New developments in technology have been adopted and changes in consumer behaviour are being addressed. Bryson plcs Research & Development department have been busy developing new products or modifying existing products, whilst Operations & Production have been working with Sales & Marketing, reviewing the future of the companys existing lines of production.

The Financial Director has requested that your team of finance managers evaluate each investment proposal by considering the relevant cash flows involved and by performing financial appraisals on the basis of net present value. A report on your main findings is required.

following general information regarding Bryson plc:-

1. Bryson plc prepares accounts with a financial year ending 31^st December and company earnings are subject to 19% corporation tax, payable on a current year basis.
2. Land and buildings qualify for 5% reducing balance industrial buildings allowances whilst plant, equipment and machinery are subject to short-life asset election and attract 20% reducing balance tax allowances. Capital allowances can be claimed in the year of acquisition and every subsequent year of ownership except for the last year where a balancing allowance can be claimed or there will be a balancing charge to the company, unless otherwise specified in the particulars of each case.
3. The general inflation rate is 3% p.a. and all operating cash flows (revenues and operating costs) are quoted at current 2021 prices and subject to annual inflation, unless otherwise specified in the particulars of each case.
4. Management considers the companys overall existing average cost of capital is an appropriate rate to appraise all capital investments.
5. Extracts from Bryson plcs current Statement of Financial Position and additional information pertaining to the companys securities is given below:-

		50p ordinary share capital	120,000,000
		8% 1 preference share capital	60,000,000
Net Assets	260,000,000	12.5% 100 loan stock 2025	80,000,000

Bryson pays a constant dividend of 33p per share and the loan stock is redeemable at current market value. The current market prices of the companys securities are as follows:-

50p ordinary shares 220p 8% 1 preference shares 96p 12.5% loan stock 2025 100

The cash expenditure to date on this development has totalled 200,000, payable at the end of this year. The work is now complete, resulting in a marketable product Omega.

The company will need to build and equip a new factory specifically and a suitable site has been found with a purchase price of 270,000. Acquisition of the land and construction of the factory will commence at the beginning of January 2022. Construction will take one year at a total cost of 2.5 million. Half of this sum will be payable at the start of construction, the balance being payable on completion. The cost of the necessary equipment and installation will cost a total of 1,250,000 and can be done during the last two months of construction. 250,000 of this will be paid on delivery and the balance in two equal annual instalments on the anniversary of delivery. The above acquisition prices are fixed and not subject to inflation.

A significant advertising campaign will need to be undertaken for the new product Omega, commencing at the beginning of construction of the factory. During its first year the campaign will cost 150,000 and will continue for the next two years at an agreed fixed cost of 250,000 and 100,000 respectively. Payments will be made at the end of each of the 3 years. As a result of the advertising campaign, the Sales Director is forecasting an annual demand of 400,000 units of Omega in 2023 and expects this demand to continue for six years after. Initial production will begin immediately after completion of the factory at an annual output rate to match the forecasted demand from 2023 onwards.

Production overheads will consist of variable costs of 4.50 per unit and annual fixed costs of 300,000. Both production costs are quoted in current terms and are subject to general inflation p.a. After 3 years of production the equipment will need replacing. The old machine will be sold for 450,000 and new equipment acquired at the end of 2025 at the same cost and on the same terms of payment as the original equipment. This replacement can be achieved without disruption to production.

At the end of six years of production, Omega will be abruptly discontinued, and the production facility will then be surplus to requirement. It is expected that the equipment can be sold at the time for 450,000 and the factory and site will command a price of 3 million. Capital allowances for both of these categories of non-current assets will begin in the year of production.

Despite extensive market research during the last 6 months at a cost of 50,000 payable on 1^st January 2022, management remains uncertain as to the price it will be able to charge for Omega. The Sales Director is currently suggesting a fixed selling price of 9 per unit (ignore inflation).

Financial Director Requirements

Assuming the Sales Directors forecast selling price is adopted, evaluate whether the company should go ahead with the proposed production of Omega, by calculating the net present value of the investment.

What would be the minimum selling price that must be achieved in order to ensure Omega is viable?