need operating cash flow table and CFFA table; use table to explain the relevant incremental cash flow and all the following questions.

CarCell Inc Instructions: Your final report should include a complete set of tables, numerical and written answers to each part of the assigned questions. Show your computation steps. Your written report for this project should not exceed 8 pages. If necessary, you can choose to provide additional evidence such as supporting excel calculations, regressions, additional tables or data. CarCell is an American retailer located in Seattle, WA. The company president is Tracy McTeir, who inherited the company. When the company was founded over 40 years ago, it originally focuses on producing high-end batteries, for automobile manufacturers. Over the years, the company still maintains its main business, which accounts for about 50 percent of its total revenue. Faced with stiff competition, the company also expanded into the business of manufacturing its own fully electric cars. You and your team, the Carson College of Business graduates, are hired by the company's finance department to evaluate a new project for the company. As of now CarCell's only car model is a compact car called the CC1, and sales have been excellent. CarCell's main competitor in the electric car market is Tesla, Inc (TSLA). CarCell's CC1 is similar to the Tesla Model 3 but have a longer driving range per charge. However, CarCell wants to incorporate a new luxury vehicle, the CCS into their lineup. CarCell spent $12,000,000 to develop the new CCS which features quicker acceleration, even greater driving range, a new more aerodynamic design and a nicer interior than the existing CC1. The company has spent a further $250,000 for a marketing study to determine the expected sales figures for the new car. CarCell can manufacture the new car for $49,600 per vehicle in variable costs. Fixed costs for the operation are estimated to run $35 million per year. The estimated sales volume is 5,750, 6,437, 4,744, 3,325 and 2,723 cars per year for the next five years, respectively. The unit price of the new car will be $80,000. The necessary equipment can be purchased for $450 million and will be depreciated on a seven-year MACRS schedule. It is believed the value of the equipment in five years will be $355 million. As previously stated, CarCell currently manufactures the CC1. Production of the existing product is expecting to be terminated in three years. If CarCell does not introduce the new luxury CCS product, sales of the existing product will be 12,000, 10,750 and 8,700 cars per year for the next three years, respectively. The price of the existing car is $35,000 per car, with variable costs of $19,950 each and fixed costs of $25 million per year. If CarCell does introduce the new car, sales of the existing one will fall by 1,000 cars per year, and the price of the existing cars will have to 1be lowered to $32,000 each car. Net working capital for the project will be 20 percent of sales and will occur with the timing of the cash flows for the year; for example, there is no initial outlay for NWC, but changes in NWC will first occur in Year 1 with the first year's sales. CarCell has a 25 percent corporate tax rate. The company has a target debt to equity ratio of .6 and is currently CCC+ rated (according to S&P 500 ratings). The overall cost of capital of the company is 14 percent. The finance department of the company has asked your team to prepare a report to Tracy, the company's CEO, and the report should answer the following questions. QUESTIONS 1. Can you and your team prepare the income statement table, the operating cash flow (OCF) table, and the total cash flow from assets (CFFA) table for this project? 2. Can you use these tables to help explain to Tracy the relevant incremental cash flows of this project? 3. James, a newly graduated MBA in the company's finance department suggested that you should use 14% as the discount rate for the discounted cash flow (DCF) analysis for this new project. Do you and your team agree with James? a) If Yes, can you explain to Tracy, the president of the company, why you should use 14%? b) If Not, please find the cost of capital for this project, and explain in details how your team comes up with this number and why it is proper for this DCF analysis? 4. What are the NPV and IRR of the project? 5. Should Tracy take the new project? Why or why not? * **** End * * * * * 2