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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
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 $80 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 investment of $90 million right now and $45 million one year from now. It will take one year to complete, so production will only start in the second year. The factory will be depreciated linearly to zero over 5 years after its completion. 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. The firm's marginal tax rate is 34%. Part 1 (1) Attempt 2/10 for 10pts. What is the annual depreciation (in $ million)? Part 2 (1) Attempt 1/10 for 10pts. What is the after-tax operating income in year 2 (in $ million)? What is the after-tax operating income in year 3 (in $ million)? Part 4 Attempt 1/10 for 10 pts. What is the cash flow from assets (CFA) at the end of year 0 (in \$ million)? Part 5 Attempt 1/10 for 10 pts. What is the cash flow from assets (CFA) at the end of year 1 (in \$ million)? Part 6 Attempt 1/10 for 10 pts. What is the cash flow from assets (CFA) at the end of year 2 (in \$ million)
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