Beats wants to build a new factory to produce its headphones. It will cost $230 million initially to build the factory o

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Beats wants to build a new factory to produce its headphones. Itwill cost $230 million initially to build the factory over thecourse of 12 months, which will be worthless after 10 years. Thefactory will be depreciated linearly to $0 over 10 years. Beatsalready owns the land on which the factory will be built. The landis currently worth $10 million and was purchased for $2 millioneight years ago.
After completion of the factory at the end of year 1, Beatsexpects earnings before interest and taxes (EBIT) of $39 millioneach year for 10 years. The company also has to add inventory(components) worth $15 million just before operation starts at theend of the first year.
Beat's marginal tax rate is 21% and the appropriate cost ofcapital for this project is 9%.
1. What is the cash flow from assets in year 1 (in $million)?
2. What is the annual depreciation in year 2 (in $ million)?
3. What is the cash flow from assets in year 2 (in $million)?
4. What is the cash flow from assets in year 11 (in $million)?
5. What is the NPV of this project (in $ million)?