how you calculated the Depreciation?

You work for Apple. After toiling away on $13 million worth of prototypes, you have finally produced your answer to Google Glasses: Glasses (the name alone is genius). iGlasses will instantly transport the wearer into the world as Apple wants him to experience it: iTunes with the wink of an eye and apps that can be activated just by looking at them. You think that these will sell for five years until the next big hing comes along (or until users are unable to interact with actual human beings). Revenues are projected to be $470 million per year along with expenses of $364 million. You will need to spend $68 million immediately on additional equipment that will be depreciated using the 5-year MACRS schedule. Additionally, you will use some fully depreciated existing equipment that has a market value of $12 million. As the iGlasses are an outcome of the R\&D center, Apple plans to charge $5.7 million of the annual costs of the center to the Glasses product for four years. Finally, Apple's working capital levels will increase from their current level of $130 million to $148 million mmediately. They will remain at the elevated level until year 4 , when they will return to $130 million. Apple's discount rate for this project s13% and its tax rate is 35%. Calculate the free cash flows and determine the NPV of this project. (Note: Assume that the opportunity cost must be after-tax and the equipment is put into use in year 1.) an eye and a e unable to int end $64.1 mill d existing equ costs of the immediately. te is 21%. Ca into use in ye The fully depreciated (Book value =0 ) equipment that could be sold for $12 million represents an opportunity cost. If you sold it, you vould have to pay taxes on the difference between the $12 million and its book value (0), so you would have to pay (0.35)($12 million) =$4.2 million. Thus, by using the equipment, you are giving up $12 million $4.2 million =$7.8 million after-tax from selling the equipment. We will recognize this cost in year 0