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 investment of $60 million right now and $30 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%. What is the annual depreciation (in $ million)? What is the net operating profit after taxes in year 2 (in $ million)? What is the net operating profit after taxes in year 3 (in $ million)? What is the incremental cash flow (CF) at the end of year 0 (in $ million)? What is the incremental cash flow (CF) at the end of year 1 (in $ million)? What is the incremental cash flow (CF) at the end of year 2 (in $ million)?
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 investment of $60 million right now and $30 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
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%.
What is the annual depreciation (in $ million)?
What is the
What is the net operating profit after taxes in year 3 (in $ million)?
What is the incremental cash flow (CF) at the end of year 0 (in $ million)?
What is the incremental cash flow (CF) at the end of year 1 (in $ million)?
What is the incremental cash flow (CF) at the end of year 2 (in $ million)?
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