Specifically, assume that development costs of $14 million and $4 million are incurred at the beginnings of years 1 and 2, and then the sales in the current model occur one year later, that is, from year 2 until year 23. Imagine that in this model the sales increase, then stay steady, and finally decrease. The gross margin is $4 million in year 1, then increases by 10% annually through year 7, then stays constant through year 12, and finally decreases by 5% annually through year 23. What is the gross margins for year 8 to 12?

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