Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

The newest ambitious project from Tesla is the all-electric Model Y compact crossover. After spending $3 million on research, Tesla has developed the new model.

The newest ambitious project from Tesla is the all-electric Model Y compact crossover. After spending $3 million on research, Tesla has developed the new model. The project requires an initial investment in plant and equipment of $12 million. This investment will be depreciated straight-line over three years to a value of zero, but when the project comes to an end in three years, the equipment can, in fact, be sold for $500,000. Accepting this project will reduce the unit sales of Model X by 1000 units per year, the sale price of Model X is $40,000. The firm believes that working capital at each date must be maintained at 10% of next year's forecasted sales. Production costs are estimated 60% sale price and Model Y's expected sales is $48000. Sales forecasts are given in the following table. The firm pays tax at 35% and the required return on the project is 12%. What is the NPV?

Year 0 1 2 3 Sales in thousands 0 100 80 40

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Essentials Of Investments

Authors: Zvi Bodie, Alex Kane, Alan Marcus

11th Edition

1260288390, 978-1260288391

More Books

Students also viewed these Finance questions

Question

What is the fixed asset turnover ratio?

Answered: 1 week ago

Question

In Exercises 126, graph each inequality. V y > 3x + 2

Answered: 1 week ago

Question

=+a) Is this an observational or experimental study?

Answered: 1 week ago