Apple has made a technological breakthrough, its new NextPhone product. Initial investment in development is expected to be $140 million. The project should have a useful life cycle of 5 years before newer technology replaces it. The price per phone is expected to be $200 based on phone prices now. The variable cost of production per phone is expected to be $120 based on production costs now. (There are no fixed costs except the initial investment.) Demand for the phone is expected to be 1 million units (phones) per year (remaining the same in each of the 5 years of the project). The initial investment would be depreciated according to 5 -year MACRS. At the end of the project, the equipment could be sold for $20M based on prices for 5 -year-old equipment now. Inflation is expected to be 5% per year in electronic products such as the NextPhone; 2% per year in production costs; and 1% per year in equipment for production. Cisco's nominal WACC for this project is 15%, and Cisco's tax rate is 35%. There is no impact on working capital. Calculate the NPV for this project. To reduce the steps in solving this problem, consider the following partially completed nominal analysis: The problem has us consider inflation in general and differential levels of inflation for various cash flows. Note, too, the logical way that Apple determines prices and costs and how easily inflation "sneaks" its way into a capital budgeting analysis. 125,324,942130,572,234123,591,468121,348,984