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(1) 5 pts

Ford Motor has been successfully producing the Ford Aspire in India.It has best-in-class safety features and has premium interiors.Designed to exude success, it's been chosen the best car in India by several critics.Ford now wishes to extend the product into other parts of Asia and is considering producing the car in China.China is the world's largest auto market, yet Ford would consider this a very high risk project for numerous political, market, and logistical issues.

This will involve an initial investment of RMB 4 billion in year zero.The plant will start production in year one.The plant is then expected to produce cars for ten years.We can also assume a salvage value at the end, year 10, of RMB 500 million.The tax law there allows the use of the straight-line method over the ten years of cash flow to depreciate the original value to the salvage value.

The plant will produce 80,000 cars per year.Ford assumes that it can sell the cars initially for RMB 65,000.Thereafter the selling price is expected to increase 4% per year.

Auto production materials for each car are expected to be RMB 18,000 per vehicle in the initial production year and increase at 2% per year.

Total labor costs for the plant are forecasted to cost RMB 1.1 billion and thereafter increase at 7% per year.

Ford will rent the land on which the plant is built for RMB 300 million per year.The initial payment is upfront, in year zero, so this is a year zero expense through a year 10 expense.

Ford's cost of capital is 15%, but assigns a hurdle rate of 18% to this project.Profits are taxed at 21%.

Assume all cash flows take place at the end of the year.

What is the NPV?(1 pt) The IRR?(1 pt) The Payback? (1 pt).

If labor costs actually increase by 10%, what is the NPV?(1 pt).

Keep labor costs at a 10% increase. If event risk, political risk, or other factors terminate the project at the end of year 5, what is the NPV?(1 pt)

Fill all answer cells with yellow paint, only those will be graded.Don't fill yellow paint on any cell except an answer cell.Be very careful, it's important that many of you do well on this and one mistake can obliterate the entire spreadsheet.