Intro Apple is planning to launch a new easy-to-use kitchen appliance with a touchscreen interface, the iToaster. Apple expects to sell 1 million and 2 million units in the first two years after launch, respectively, and then to discontinue this product. Each unit will sell for $200 in the first year after launch, and $150 in the second year. The costs of components and labor are $60 per unit, while salaries and other expenses add up to $10 million in each year the product is sold. The factory that manufactures the iToaster requires an $50 million investment right now and will take one year to complete. The factory has a 5-year tax life after completion and is depreciated straight to zero. However, Apple expects to be able to sell the factory at the end of the project for $40 million. To get production up and running, Apple has to buy components worth $5 million immediately before the launch of the product, and add another $2 million worth of components to its inventory exactly one year later. Assume the project is of approximately the same risk as the firm's existing operations. The firm's marginal tax rate is 34%. The following data are current: Stock: 9 million shares outstanding, price per share is $220, beta =1.4 Bond: Book value of $600 million, face value of $1,000,5% coupon, paid semi-annually, 20 years to maturity, currently priced at $786.45, implying a YTM of 7%. Market: Treasury bills have a return of 1% and the market risk premium (MRP) is 8.5%. What is the cost of equity? Part 2 What is the market value of the bond issue (in \$ million)? Part 3 What is the (pre-tax) cost of debt? What is the weighted average cost of capital? Part 5 What is the annual depreciation (in $ million)? Part 6 What is the operating cash flow in year 3 (in $ million)? What is the after-tax salvage value of the factory when it is sold (in $ million)? Part 8 What is the cash flow from assets at the end of year 3 (in $ million)? Part 9 What is the NPV of this project (in \$ million)