Consider the following information:

• Two months ago management hired a consulting firm to conduct a market survey. This study cost $ 6,000. And noted that the market for dog food would allow us to sell 2,500,000 units annually for the next eight years.

• As a result of selling the new product, our company would lose sales of 500,000 units per year of regular food.

• The manufacture of the diet food would be carried out in a warehouse belonging to the company, but at the moment it is not being used. This store has a market value of $800,000. and is totally depreciated (its value in books is zero).

• The company would have to invest $500,000. in modifying the store to be able to use it in the elaboration of the diet food. This modification would be incurred.

• The company would also have to buy machinery necessary for the elaboration of diet food. This is priced at $700,000. and would depreciate a straight line to ten years.

• The company would have to increase the investment in operational capital by $ 300,000.

• The selling price of diet food would be $ 0.80 per unit in the first year ($ 1 to 1, nominal) and would increase at a rate of 3% annually in nominal terms.

• The profit margin of the regular feed in the first year would be $ 0.40 ($'s at 1, nominal) and would increase at a rate of 4% per annum in nominal terms.

• The company would have to hire a new factory manager at a cost of $ 150,000. At year 1 ($'s year 1, nominal). The factory manager's salary would increase at the same rate as inflation, 2% per year.

• After eight years, we would stop producing diet food and sell the machinery used for processing it for $ 100,000 (real, $'s year 0) and the store for $ 1,000,000 (real, $'s year 0). We would recover the investment in operational capital.

• The required performance is 10% in real terms. The marginal contribution rate is 34%

A. Find the initial investment

B. Find the Present Value of the sales of diet food.

C. Find the Present Value of the variable costs of producing diet food.