$2.$ Suppose Elon Musk has an existing business making electric bicycles. Sales are so strong that he is considering selling his existing factory and replacing it with a new factory.

$-$ The current factory can be sold for $$200$mm; it has a tax value of $$50$mm$.$ The current factory produces annual after tax cash flow of $$40$mm$.$ Elon believe that after eight years from now, the existing factory would have a resale value of $$30$mm with a tax value then of $$10$mm$.$

$-$ A new bicycle factory can be built for $$200$mm and equipment will cost $$350$mm plus installation costs of $$45$mm$.$ Assume the plant and equipment can be built and operational on day one.

$-$ Expect working capital needs as follows $($starting on day one$)$: Increase of $$45$mm in Accounts Receivable and $$55$mm of Inventory; expect increased $$30$mm of Accounts Payable.

$-$ He initially projects after$-$tax cash flows of $$250$mm per year for eight years occurring on the last day of each year, starting at the end of year one and finishing after eight years of operations.

$-$ Assume that after eight years, Elon gets bored and liquidates the business. Assume the working capital is liquidated and the PP&E is sold for $$200$mm $($assume it had been depreciated to $$100$mm$).$

$-$ Assume a tax rate of $30\%$ and a cost of capital of $16\%.$

For the Musk project, what is the present value of the net after tax cash flows?

$-$ Question $12$ options:

$$868\mathrm{.}7$mm

$$342$mm

$$1,200$mm

$$651\mathrm{.}5$mm

$$675$mm

$$912$mm

$$895$mm

For the Musk project, what is the aggregate amount of the net terminal cash flows? Not yet present valued!

Question $13$ options:

$$435\mathrm{.}3$mm

$$228\mathrm{.}6$mm

$$168\mathrm{.}6$mm

$$216\mathrm{.}0$mm

$$242\mathrm{.}63$mm

$$185\mathrm{.}0$mm

For the Musk project, what is the present value of the terminal cash flows?

Question $14$ options:

$$55$mm

$$76$mm

$$152$mm

$$49\mathrm{.}7$mm

$$66$mm

$$234\mathrm{.}9$mm

For the Musk project, what is the NPV$?$

Question $15$ options:

$$50$mm

$($$$23$mm$)$

$$146$mm

$$652$mm

$$100$mm

$$17$mm

$$468$mm

$$284$mm

For the Musk project, what is the IRR?

Question $16$ options:

$23\%$

$18\%$

$39\%$

$$65$mm

$28\%$

$(2\%)$

$$54$mm