Top Gear Motors is a car manufacturer operating in the US market. The firm is considering producing a new electric car. The car involves an initial investment of $2.25 billion to build and operate a new factory. The expected life of the factory is 10 years (depreciating linearly). However, the company is expecting to be able to sell the factory at the end of 7 years for $720 million. The company paid $3 million to acquire the land on which the factory will be built. The new factory can produce a maximum of 72,000 cars per year. According to the estimates of the CFO, the firm is expecting to produce and sell 54,500 new cars per year in the first two years and the sales are expected to grow by 3% per year from year 3 onwards (assume that there is no inventory, i.e. the whole production is sold). The price per car will be $28,500 for the first three years and is anticipated to increase by 2% thereafter. The firm has paid $80,000 to an external consultant to ensure that the new factory is environmentally compliant, while it is planning to spend another $50,000 for the same purpose at the end of the second year of operation of the new production unit. Fixed production costs are $40 million per year. Raw materials are forecasted to be $12,000 per car for the first two years while they are expected to increase by 3.25% from year 3 onwards. Total labour costs for the factory are expected to be $250 million in the first year and then will decrease by 1.5% per year. The land on which the production unit will be built is currently rented out to a neighbouring firm for $60,000 per month. Advertising costs are expected to be $40,000 per year for the first four years and $20,000 per year for the remaining period. To collect the above information the company paid $60,000 to a marketing company. tax rate is 28% and WACC is2.01%

A. Should the firm go ahead with this investment?

B. What is the required capacity utilisation of the new machine in order to achieve a profit from the project of at least $700 million?