The research and marketing department is planning to launch a new product in the market. The department has conducted a survey in the market which had cost $ 5,000. The following information has been gathered from the survey: Year 1 2 3 4 Forecasted demand (units) 70,000 80,000 100,000 50,000 The selling price and costs are all in current price terms. Selling price $ 13 per unit Variable cost $ 9 per unit Incremental fixed production overheads $ 50,000 per annum The selling price and costs are forecasted to increase each year as follows: Increase Selling price 3% per year Variable cost 4% per year Incremental fixed production overheads 6% per year The company will be required to purchase a new high-tech machine which will cost $ 700,000 and has a life time of four years, at the end of which time it will be sold for $ 165,000. Additional information: 1. The company has a real cost of capital 6% (after-tax) and general inflation is expected to be 4.717% per year. 2. Annual allowances can be claimed at the rate of 25% on a reducing balance basis. 3. Annual tax rate is 30% and is payable one year in arrears. 4. The company has a target return on capital employed of 30% for new project. The accounting policy of the firm is to charge depreciation on a straight-line basis. REQUIRED (a) (i) Calculate the net present value of buying the new high-tech machine to manufacture the new product.