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In this fictitious case, you are a Financial Analyst in Electric R Us ( ERU ) Motor Inc. Your responsibilites include evaluating the financial

In this fictitious case, you are a Financial Analyst in "Electric R Us"(ERU) Motor Inc. Your
responsibilites include evaluating the financial and strategic implications of Corporat
Investment decisions.
Please evaluate the case study with the below given information
For your meeting with Ford Finance Interviewers:
Review the case study and prepare Executive summary that addresses the
strategy.
Make appropings pertaining to the summary
Make appropriate assumptions that is relevant for arriving at the decision.
"Electric R Us"(ERU) Motor Inc. plans to construct a Gigafactory that will be operationa
from January of 2024.
Volumes
The operating capacity is to produce and sell 1,000,000 units (1 million) starting 2024 with
growth rate of 5% every year until 2030. You can assume that cash inflows happen at
are the overy year (i.e.,2024 to 2030). Depending on the business scenarios, below
re the expected units of sales forecasted for 2024
Revenue
ERU can sell these battery packs at $20,000 per unit starting 2024. Due to smarter battery
packs and lower cost per KWHr, ERU's prices every reduce by 2%, but because of raw
material inflation, ERU can increase prices by 2% annually, which is the expected inflation
rates from 2024 to 2030.
Cost of Goods
The cost of manufacturing these battery packs (per unit) for 2024 are as follows:
This does not include any fixed costs related to building and plant. Due to efficiencies of
scale and newer technology, costs are expected to reduce 3% annually until 2030.
Buildings and Plant
ERU has to invest $5 Billion for land, buildings and plant facilities to get the plant
operational by 2024 beginning.
Buildings and plant facilities are depreciated on an accelerated basis between the time
he plant is operational. Assume all cash outflows happen at the beginning of 2024. Th
gain over its net book value.
Working Capita
The project must incur a working capital of $100 million at the start of 2024 and is
recovered the the of 2030 when the project ceases operation.
Sales, General Admin Expenses
Assume that ERU will incur incremental SGA expenses of 2% as a percentage of
Revenue fom that period. It also incurred $200 million in 2023 to study the opportunity of
setting up operations and the results from the study were positive.
The marginal tax rate of ERU is 30% and ERU uses 9.6% as the cost of capital to assess
viability of its capital projects.
Questions
Based on your evaluation of this investment, recommend the management whether
they should proceed and accept or reject the decision
What is the Discounted Payback Period for this project?
What is the hurdle rate that ERU can accept before revising their decision?. I have to submit with in 60mins. I will give likes to your answer.
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