Tesla, a US car manufacturer, has a Chinese subsidiary Shanghai Tesla Super factory that manufactures and sells electric cars in China.

The main input is priced in USD (USD10,000/unit)

All other costs are in CNY (Fixed cost=CNY 500 million, Variable cost= CNY50,000/unit).

Depreciation = CNY 1 million S0 = CNY6.5/USD

Expects to sell 10,000 cars this year at CNY300,000 each.

Tax rate=30%; assuming tax credits are available for immediate use if losses occur Please type your answers as a number to 0 decimal place in the boxes below and do not include the currency symbols. For example, if your answer is AUD12345.67, please enter 12346. Please create an Excel spreadsheet to answer all of the following questions and upload your Excel spreadsheet in the next file response question. (Hint: you may use the goal seek and/or solver functions in Excel).

What are the operating cash flows in CNY? (2 marks)

What are the operating cash flows in USD? (2 marks)

How many units does Tesla need to sell to break even in operating cash flows in dollars? (2 marks)

Besides sales in China, Tesla Shanghai Super Factory also exports cars to Australia. For the rest of the question, assume that the additional sale to Australia is 1,000 cars and the price is AUD 60,000. The shipment cost per exported car is CNY5,000. The sales revenue in Australia will be translated to the U.S. directly at the spot exchange rate. Now the exchange rate is AUD1.5/USD and CNY6.5/USD. (Note: all productions are in China, but Chinese corporate tax is exempt for these exports. Please do NOT consider U.S. tax or Australian tax).

What are the operating cash flows in dollars now? (2 marks)

If the spot rate reduces to CNY6.0/USD, Tesla would like to pass all benefits to its client by reducing the selling price. What would be the new selling price that would maintain Teslas operating cash flow in USD in Part (c) and would pass all benefits to its client at the same time? (2 marks) If the spot rate increases to CNY7/USD, Tesla would like to maximize its operating cash flow in USD by changing the selling price and variable cost in CNY (main input in USD and exports are NOT changed) but its actions are restricted by the following constraints: 1) The selling price cannot increase by more than 20% from the original selling price; 2) The variable unit cost in CNY (not including the main input) can only be between 90% and 110% of the original cost; 3) Units sold will reduce at the same rate as the selling price increases.For example, units sold will reduce by 10% if the selling price increases by 10%. Please fill out the values of the following three variables that would maximise Teslas operating cash flows in USD. New Selling Price per unit (2 marks) New Variable Cost in CNY (Not including the main input) per unit (2 marks) New Unit Sold (2 marks)