Hewlett-Packard has designed a new type of printer that produces professional-quality photos. These new printers took 2 years to develop, with research and development running at $10 million after taxes over that period. Now all thats left is an investment of $22 million after taxes in new production equipment.

It is expected that this new product will bring in free cash flows of $5 million per year for each year of the next 10 years.

In addition, if Hewlett-Packard goes ahead with the new lines of printers, the current production facility for the old printers that are to be replaced with this new line could be sold to a competitor, generating $3 million after taxes.

a) How should the $10 million of research and development be treated.

b) How should the $3million from the sale of the existing production facility for the old printers be treated?

c) Given the information above, what are the cash flows associated with the new printers?