Example: Launching a Product - A firm that is considering releasing a new line of financial calculators. To do this, they will need to make a capital expenditure of $10 million initially. In their first year, they believe they will sell 100,000 calculators for a price of $80 each. They will adopt a straight-line depreciation convention over a 4-year project life. Variable costs are 25% of sales, and they pay fixed costs of $2 million a year. The company is taxed at a rate of 10% per year. What is the firm's cash flow from assets in its first year operating? - If the firm's cost of capital is 12% and they have the same cash flows each year (after the year-o investment) what is the NPV of their project