![]() ![]() (Note: Assume that the opportunity cost must be after-tax and the equipment is put into use in year 1.) Calculate the free cash flows below: (Round to two decimal places.) ($ million) Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Sales $ 0.00 $ $ $ $ $ - Cost of Goods Sold 0.00 Gross Profit $ 0.00 $ $ S - Annual Charge 0.00 0.00 0.00 0.00 0.00 0.00 0.00 - Depreciation EBIT $ $ $ $ $ $ $ $ - Tax $ $ $ $ $ $ 0.00 0.00 0.00 0.00 Incremental Earnings + Depreciation - Incremental Working Capital - Capital Investment - Opportunity Cost Incremental Free Cash Flow 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0. Calculate the free cash flows and determine the NPV of this project. Apple's discount rate for this project is 15.9% and its tax rate is 21%. They will remain at the elevated level until year 4, when they will return to $119 million. Finally, Apple's working capital levels will increase from their current level of $119 million to $140.5 million immediately. As the Glasses are an outcome of the R&D center, Apple plans to charge $5.2 million of the annual costs of the center to the Glasses product for four years. Additionally, you will use some fully depreciated existing equipment that has a market value of $9.3 million. You will need to spend 564.1 million immediately on additional equipment that will be depreciated using the 5-year MACRS schedule. Revenues are projected to be $457 million per year along with expenses of $352.3 million. Can be controlled with an Apple Remote on supported Macs. Simple controls allow for full digital pan, tilt and zoom. iGlasses digital zoom is a quick way to enhance the appearance of your video chats. You think that these will sell for five years until the next big thing comes along (or until users are unable to interact with actual human beings). Apple's built-in camera provides a great wide angle, but a nice head-and-shoulders shot gives a more professional look. 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. ![]() After toiling away on $10.5 million worth of prototypes, you have finally produced your answer to Google Glasses: iGlasses (the name alone is genius). ![]()
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