Tommy Sdn Bhd spent RM5 million over the past three years in researching and developing of hair tonic. The hair tonic is now ready for production with the following predicted sales.

Predicted sales
	Year 1	Year 2	Year 3	Year 4	Year 5
No of units	600,000	600,000	700,000	700,000	500,000

The selling price per unit will be RM30 in the first year but will fall to RM22 in the following three years. In the final year of the products life the selling price will reduce to RM20. Variable production costs are predicted to be RM14 per unit and fixed production costs (including depreciation using straight line method) will be RM2.4 million per annum. Marketing costs will be RM2 million.

The company has manufacturing space available, which it currently rents to another business for RM100,000 per annum. The company would have to purchase plant and equipment costing RM9 million and invest RM3 million in working capital immediately for production to begin. The plant and equipment can be sold for RM1 million at the end of the 5 year project life.

A market research report for which the company paid RM500,000, indicates that the new product has an expected life of five years.

Calculate

1. NPV
2. IRR
3. ARR
4. Payback period

.

The company has a cost of capital of 10%.