Intro It is the end of 2024. You're a financial analyst working for Apple. The company is considering producing a new wearable television set and is predicting the following sales (in $ million). Assume all cash flows occur at the end of the year. 1 A | B | c | D | E | F 2025 2026 2027 2028 2029 2 Sales 50 65 78 85.8 86.23 COGS and SG&A are expected to add up to 60% of sales and depreciation is expected to be 10% of sales. After 2029, sales are expected to grow by 0.5% forever. To start production at the beginning of 2025, Apple has to invest $100 million now to build a new factory. After 2025, the factory needs to be expanded to maintain the same fixed asset turnover (sales/net fixed assets) as in 2025. Net working capital consists mainly of inventory of electronics components, minus some current liabilities. Net working capital is expected to be always 30% of sales. Apple has a beta of 0.75. Its target capital structure weight for equity is 95% and the expected return on the S&P 500 is 5.1%. The average yield on its bonds is 6%, while the yield on Treasury bonds is 2%. The project is considered to be as risky as the firm overall. Apple's marginal tax rate is 19%.