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ABC, a seller of TVs , is considering launching an advertising campaign for its latest advanced product, Toptv. ABC plans to spend $ 3 million

ABC, a seller of TVs, is considering launching an advertising campaign for its latest advanced
product, Toptv. ABC plans to spend $3 million on advertisements for the campaign this year (year
0) and no advertising expenditures next year (year 1) and the following year (year 2). The ads are
expected to boost sales of the new product by $7 million next year (year 1) and $4 million the
following year (Year 2). In addition, the company expects the new consumers who try the new
product will be willing to try ABC's other products. As a result, sales of other products are expected
to rise by $2 million next year (year 1) and the following year (year 2). The cost of goods sold this
year (year 0) is 2 million, 5 million next year (year 1), and 3 million in the following year (year 2).
The company's other projects are very profitable, and the company's marginal corporate tax rate
is 35%. What is the Unlevered net income associated with the advertising campaign in year 1 and
year 2? What are the free cash flows in year 1 and year 2? Assume there are no CCA, NWC, or
CapEx requirements/amounts.
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