You work for a company that is evaluating developing a new online video game. Your company will need to spend $$2$ million per year in software development costs at the end of each of the next four years $($all of which are tax deductible$).$ Starting the end of the fifth year, you expect to sell the game for an annual subscription price of $$300$ per player. It will be sold through Apple$$s game site, and Apple will keep $25\%$ of the price. On top of this, your company expects to have to pay ongoing development costs of $$500,000$ per year, all of which will be expensed $($i$.$e$.,$ tax deductible$).$ At the end of the $15$ years of selling the game, your company expects to sell the list of subscribers to another company for $$1$ million $($which will also be taxable$).$ Given the risk of the investment, your company requires a $25\%$ annual rate of return. Your company$$s tax rate is $30\%.$

Use this information for questions $9-11.$ Enter all your answers to the nearest dollar, without a dollar sign.

To help you with your "time line", $$2$ million in software development costs are expected to spent at the end of years $1-4.$ These costs are tax$-$deductible and there is enough profit in other parts of the company to take advantage of the tax deduction. This investment needs to be recovered over the ensuing $15$ years $($so years $5-19).$ The cash flow associated with subscriptions is the same every year $($though you need to factor in the ongoing development costs as well$).$ At the end of the project, the subscriber list is sold $($which is subject to tax$).$ This information is repetitive to what is described earlier; it is being shared to help you draw a "time line", something I've emphasized is an important place to start.

What is the value of the four years of initial software development cost that needs to be recovered, $$sitting$$ at the end of the four$-$year investment period $($after taxes$)?$B$-$ What is the annual after$-$tax cash flow that needs to be generated over the next $15$ years to achieve a $25\%$ return in light of the other facts above? c$-$ How many subscribers per year will the company need to sign up to achieve a $25\%$ return in light of the other factors above? You should assume the number of subscribers are the same every year. $($Don$\text{'}$t forgot about the ongoing development costs per year$).$