Question $2[20$ marks$]$

An electric vehicle $($EV$)$ battery manufacturer is evaluating an investment opportunity which will

increase its production capacity significantly. The firm's analyst has estimated the following

information:

The cost of the new production facility is estimated at $$240$ million with a useful life of ${10}_{?}$

years and a salvage value of $$30$ million at the end of $10$ th year.

The new facility is expected to produce $60,000$ units of EV batteries per year. All produced

batteries are expected to be sold due to strong demand.

The sale price of the battery is $$5,000$ per unit.

Production requires $20$ hours of labor per unit, and the estimated labor cost is $$40$ per hour.

It also requires raw materials and various parts that cost $$2,200$ per unit.

The operation of the new production facility requires additional operating expenses,

estimated at $$39$ million per year.

Answer questions a$)$ and b$)$ below.

a$)[10$ marks$]$ Calculate the following two items: i$)$ the production cost $($i$.$e$.,$ cost of goods

sold$)$ per year: and ii$)$ depreciation expense per year $($assume straight$-$line depreciation$).$

$*$For full credit, you must show the steps$/$calculation toward your results.

b$)[10$ marks$]$ Calculate the project's EBIT per year.

$*$For full credit, you must show the steps$/$calculation toward your results.$|$