Intro

Apple is planning to leunch a now sasy$-$bo$-$uas witchen appliance with a

touchecreen interface, the ITosetar. Apple axpects to sell $1$ milion and $2$ million

units in the first two years after leunch, respectively, and then to discontinue this

product. Each unkt will sell for $$200$ in the first yaar afier leunch, and $$150$ in the

socond year. The costs of components and labor ane $$70$ per unit, while saleries

and othor expenses add up to $$10$ milion in each year the product is sold.

The factiony that manufactures the iTosater requins an investment of $$90$ milion

right now and $$45$ million one yese from now. It will take one year to complete, so

production will only start in the second yeer. The factory will be deprecisbed

Inearty to zero Over $5$ years after is completion.

To got production up and nunning. Appla has to buy componanta warth $$5$ millian

immediabely before the launch of the product and asd another $$2$ millian worth of

componants to ils invantory exactly one yaar laber.

The firm's manginal tax rate is $34\%.$

Part $1$

What is the annuel depreciation $($in $ million$)?$

Comect $$

The initiel book velue of the factory is:

$B{V}_0=90+45=135$

Wh linear depmedation over $5$ years, the annual depreciation is$.$

Dep. $=\frac{135}{5}=27(milion)$

Part $2$

What is tha nat operaling praft affer tawes in yaar $2($in $ millony??

Part $3$

What is the nat oporaring profl affer tawes in yaar $3($in $ miliony?

Part $4$

What is the incremantal cash flow $($CF$)$ at the end of your $0($in $ miliany?

Part $5$

What is the incremantal cash flow $($CF$)$ at the end of your $1($in $ millany?

Part $6$

What is the incremental cash flow $($CF$)$ at the end of your $2($in $ miliony?