3. Net present value (50 points) Suppose BYD, the Chinese electric vehicle manufacturer is going to enter the EV market next year in the US next year. The President sets a $10,000 tariff on the imported EVs from China. Even though it costs $10,000 more than the current cheapest new vehicle on the market, a Nissan Versa, BYD believes that the exceptional fuel economy will attract rational market actors, who seek to maximize their net present value. a. Which car would someone buy if they plan on driving it 12,000 miles/year and selling it after 10 years? Use net present value. (20 points) Hint: This is the same process as for a power plant. Make a table and calculate annual fuel cost, total annual cost, NPV of resale value, capital recovery factor, present value (total annual cost/capital recovery factor), and cost over 10-year period for both vehicles. b. If you found that the BYD car is more expensive than the Nissan Versa, by how much does the gas price need to increase to make the car competitive? If you found the BYD to be less expensive, how much could they charge to be competitive in the market? (10 points) What other factors would go into your decision making related to buying a personal vehicle? How do you think that net present value is useful for comparison and what are its weaknesses? (5 points) . How would a $7,500 tax credit (a la Inflation Reduction Act) on new electric vehicles change this calculation? Although the BYD car is manufactured in China and would not qualify for the credit initially, estimate the effect if eligible for this tax credit. (5 points) Do you think these assumptions are reasonable? If not, which assumptions would you change and why? (10 points)