All the necessary information is already provided in this question $-$ Your firm is considering a project to supply $80$ million postage stamps per year to Canada Post for the next five years. Production would take place on an idle piece of land that you could sell today for $$1,200,000$ and you would need to install $$3,100,000$ worth of equipment on site $(20\%$ CCA rate$).$ The estimated salvage value of the equipment is $$900,000($asset pool would remain open$).$ You would also require $$600,000$ in initial working capital, and an additional $$50,000$ per year thereafter, all of which is recovered as the project ends. Variable production costs are $$7\mathrm{.}50$ per $1000$ stamps and fixed costs are $$800,000$ per year.

a$)$ If the firm's tax rate is $34\%$ and the required rate of return is $15\%,$ what is the minimum price you should charge Canada Post each year? $($charge the same price every year$)(5$ marks$)$

b$)$ If Canada Post is satisfied with your firm$$s performance during the first $5$ years $($the above project$),$ they would like the option to extend the contract for another $3$ years. For these years, no additional working capital investment would be required and the full amount would be recoverable at the end of year $8$ instead of year $5.$ Furthermore, the same machinery could be used to continue production though its salvage value would fall to $$300,000$ by the end of year $8.$ Assuming you charge Canada Post $$3,000,000$ per year for these $3$ years and have the same cost structure as above, what is the incremental NPV of this extension? $(5$ marks$)$