Question: At the end of 2013, the executives at Apple evaluated a number of competitive threats to their very profitable iPhone business and decided the iPhone 6 would need to exhibit some fundamental improvements. For example, they considered an increase in screen size, possibly to 5.5 inches, and a Bluetooth connection to an accompanying watch, which would display incoming emails and texts along with the number of incoming calls.Apple estimates that the more aggressive product launch will require a development budget of $1.5 billion versus $800 million for a more modest effort. Discuss how you would estimate the incremental cash flows associated with this decision.