The ACC Inc. already has two luxury sports brands and three affordable family cars on the market. This new car will be a more affordable sports car. Jane called this meeting to go over the long-awaited market research report for this affordable sports car model commissioned from the Markets-R-Us company and delivered yesterday. According to this report, there is a niche for an affordable sports car. However, this niche will be filled by the companys competitors in five years. Therefore, Jane thinks that the company can produce and sell these affordable sports cars for the next five years without any competition and then terminate the project when the competitors move into the market. The ACC has to pay $5,000,000 for this market research report at the end of the month. The ACC will hire an external design team for this new model and pay $6,000,000 for their services if the company decides to produce the new model. Ben recommends using the building owned by the company as the production facility for this new model. The company has been renting this building for $10,000,000 per year to its neighbor firm for the past several years. Ben talked to the tenant before the meeting and learned that the tenant would like to continue renting this building for the following 5 years. The report shows that this new sports car model can be sold for $60,000 per car this year. The price of this car will increase by 2% inflation every year. The company can sell 50,000 cars per year during the next 5 years. The variable production costs are expected to be 75% of the sales revenue. In addition to these variable production costs, there will be $100,000,000 fixed costs every year. The ACC Inc. has to buy a new machine to produce the new model which costs $1,000,000,000. Shipping, insurance and installation costs will be 5% of the acquisition cost. This machine will be depreciated to a value of 0 by straight-line depreciation method over a 6 year period. The company can sell this machine for $100,000,000 at the end of 5 years. One important point is that this new model will affect the sales of Model X20, another affordable car produced by the company. Sales of Model X20 will decrease by 10,000 units per year for the next 5 years. The existing model is selling for $50,000 now and its price is also expected to increase with inflation every year. The variable production costs for Model X20 are also 75% of its sales revenue. The fixed production costs of this model are $50,000,000 per year. To produce this new sports car model, the company has to carry an inventory of parts equal to 10% of the sales revenue of the new model in the following year. Similarly, ACC will have an increase in its accounts payables equal to 5% of the sales revenue of the new model in the following year. The ACC, Inc. is in the 34% tax bracket, and the companys investors expect a return of 12% on a project like this.

a. Calculate the total cash flows from assets (CFFA) throughout the life of this project. b. Decide if this is an acceptable project or not.