Sparrowhawk Ltd$.$ is a company that build light aircraft for people who like to fly planes as a leisure activity. Sparrowhawk Ltd$.$ is considering the introduction of a new product line, the $$Starling$$ model, in $2025.$ The costs of product design and development are estimated at$3,695,000,$ which will be incurred during $2024.$ Each plane will sell for $1,200,000$ withestimated demand of $25$ aircraft in $2025,30$ aircraft in $2026$ and $10$ aircraft in $2027.$ The price of an aircraft will be increased in $2028$ to $1,450,000$ at which point estimated demand will fall to $5$ aircraft in that year and the model will then be discontinued. All aircraft are built only. When the customer places the order.

It is estimated that two aircraft each year will require warranty repairs costing $120,000$ per aircraft and that these repairs will be done in the year following sale. To manufacture the aircraft the company will buy a special machine called a $$aero$-$groover$$ at the start of $2025$ at a cost of $35$ million. This machine can only make the $$Starling$$ model and will be depreciated on the basis of the number of units produced across its productive life. In the year following the production of the last plane Sparrowhawk Ltd$.$ will dispose of the machine and clean up the site at a total cost of $1,110,000.$ The $$aero$-$groover$$ will have

no residual value.

The variable costs of production for each aircraft are estimated to be $212,000$ in $2025$ rising by $15\%$ per year. Fixed costs associated with the production and marketing of the $$Starling$$ model will be $4,309,000$ in $2025$ rising by $8\%$ each year. Marketing costs form around $2/3$rds of these fixed costs and will cease after $2026,$ with the remaining fixed costs ending in $2028$ when the final aircraft are produced and sold. None of these fixed costs includes an element for depreciation.