Tim Cook has hired you to analyze whether Apple should invest in an electric vehicle, the "Icar." The proposed project is estimated to sell$50000,100000,150000,200000,$and $300000$ cars during years $1$ to $5.$

Apple analysts have estimated that the Icar can be sold for $$50000$ per unit. The variable costs are estimated at $$30000$ per unit. The fixed costs are estimated at $$900$ million per year. The initial investment required for this project is $$17$ billion, which can be depreciatedin a straight line over five years.

Apple analysts have also made long$-$term forecasts, estimating that starting from year $6,$ the project cash flow can be assumed to grow indefinitely at a rate of $1\%$per year.

Apple's capital structure is $36\%$ Equity and $64\%$ Debt. Additionally, Apple's corporate taxrate is $21\%.$

The market risk premium is $7\%,$and the risk$-$free rate is $4\mathrm{.}2\%$

Part I Estimating the appropriate WACC for the Icar project.

$1)$ Apple's cost of equity is $9\mathrm{.}55\%$; however, we cannot use the firm's cost of equity for this project. Explain why it is unreasonable to use Apple's cost of equity as the cost

of equity for the Icar project. $(5$ points$)$

$2)$ Explain what the pure$-$play approach is and why it is reasonable to use it in this case to obtain the cost of equity.

$(5$ points$)$

$3)$ After doing market research, you have estimated that Tesla is the appropriate firm to use as a reference for the pure$-$play approach. Tesla's beta is $2\mathrm{.}5,$ and its capital structure is $93\%$ equity and $7\%$debt. Tesla's corporate tax rate is $21\%.$

$4)$ Obtain the cost of debt. You observe that a long$-$term bond issued by Apple has exactly $10$ years left to maturity, and its market price is $$1200.$The bond coupon rate is $8\%$on a principal of $1000,$ and the coupons are paid annually. $(5$ points$)$

$5)$ Obtain the WACC that Apple should use for the lcar investment project. $(5$ points$)$

Part II

$6)$ Obtain the pro forma financial statements for years $1$ to $5.$ Hint: the pro forma financial statements should include Sales, variable costs, fixed costs, depreciation,

EBIT, taxes, and Net income. $(10$ points$)$

$7)$ Obtain the project's cash flow for years $1$ to $5.$Note that we don't have changes in net working capital, and there is no sale of the initial investment, so the operating

cash flows are the same as the project cash flows. $(5$ points$)$

$8)$Obtain the present value at year $5$ of the growing perpetuity that starts in year $6.$Add this present value to the project cash flow of year $5.(5$ points$)$

Part III Issue costs

$9)$ Obtain the issue costs fA$.$The flotation cost of equity is $10\%,$ and the flotation cost of debt is $5\%(5$ points$)$

$10)$ Find the adjusted cost for this project $(5$ points$)$

Part IV Recommendation

$11)$ Obtain the NPV $(5$ points$)$

$12)$ Based on your result in $11),$would you recommend Apple to go ahead with the Icar

project? Explain. $(5$ points$)$

Show work and Explain please.