Assume you work in the CFOs office of a new startup company. Your company, Cool, owns patents on navigation, self-driving technology, and other systems that your company sells to automobile companies. Your CEO has asked the CFO to investigate a secret project; building and selling automobiles under the brand name of Cool. The idea is to manufacture and sell Cool Cars and Cool Trucks. Cool Cars, the focus of this current project evaluation, is to have the latest technology, latest batteries (super lithium), the finest leather, and real wood trim. As this is a Denver company, the Cool Car will have full time all wheel drive (AWD), mountain (mud/snow) tires, a winch, sunroof, and the largest engine power possible.

There are many decisions to be made but the primary decision that must be made now is to decide on the type of engine to put in Cool Cars; gasoline or electric. The financial analysis shows gasoline vehicles offer an NPV of $500,000,000 over 20 years more than electric vehicles. Payback for gasoline vehicles is estimated to be 10 years and 15 years for electric cars. There are also decisions related to the supply chain and how it should be designed.

First, recommend which type of engine that the Cool Car should adopt (it has to be one, not both). Evaluate your decision from the position that the decision will mean for the Cool Car. Relatedly, the financial models were built using an assumption of a Cool Car priced at $30,000. For comparison, the top of the line Nissan Leaf $38,000-44,000; BMW i3 45,000-48,000; cheapest model Tesla (S or Y) 58,000- 63,000.

Second, decide upon the overall strategy that the Cool Car company should adopt. What does this mean for the key assumption of price? You are concerned that the price may not be realistic. What should the price be and what will this mean for your strategy and how would it impact the financial models?