Rostov Ltd is a firm involved in robotics that is considering the launch of a new product called Dombliss 15. Dombliss 15 requires initial investment in Premises of 6,000,000 and Plant & Machinery 8,600,000. The product will be produced for six years, at the end of which time the residual value of the Premises will be 5,000,000. At the end of the production run the Plant & Machinery used for the manufacture will be available for further use, but it will have a residual value of zero in the books of Rostov Ltd. The sales forecast for Dombliss 15 over the six year production run is as follows: Year 1 2 3 4 5 6 Production Units 10,000 28,000 34,000 37,500 31,000 19,000 The following additional information is provided: Dombliss 15 will come to the market at a launch price 180.00. The marketing team have forecast that this price will increase by 10% in year 2, and a further 10% in year 4. The Raw material cost per unit is forecast to be 67.00 in year 1, and this cost will rise by 5% per annum thereafter. The Labour cost for production of each unit will be 8.80 in year 1, with this cost expected to rise by 0.50 per unit per annum thereafter. Incremental fixed costs that are specific to Dombliss 15 are expected to be 234,000 per annum. Research and Development costs of 1,950,000 have been incurred to bring the product to market. 70% of these costs have been paid upfront, with the remaining 30% committed to be paid in year 2. At the start of the project additional working capital of 660,000 is required. This will remain in place throughout the life of the project and will be released back at the end of the production run. The business pays Corporation Tax at a rate of 15% and this is paid in the year in which cash flows arise. Capital allowances are claimed on the Plant & Machinery on a 25% reducing balance basis. The company has a nominal cost of capital of 9%. Required a. Calculate the Net Present Value of Dombliss 15 to the nearest '000. (70 marks) b. Comment on the financial acceptability of the launch of Dombliss 15. (9 marks) c. Evaluate the factors that Rostov Ltd should consider when forecasting the plans for a product like Dombliss 15