Zeta Spenza Project
Given
Monza's sales in 2015	10,000			MACRS Schedule			Solution Legend
Monza's price	$65,000			year 1	33%		Value given in problem
Monza Cost structure per car				year 2	45%		Formula/Calculation/Analysis required
Body materials	$11,000			year 3	15%		Assumptions, Qualitative analysis or Short answer required
Engine	$4,000			year 4	7%		Goal Seek, Scenario or Data Table cell
Drivetrain	$6,000						Crystal Ball Input
Battery Pack	$20,000						Crystal Ball Output
Electronics	$5,000
Labor (allocated)	$4,000
Overhead (allocated)	$2,000
Consulting Fees	$50,000
Spenza Price	$80,000
Spenza Sales projections
		Year 1	Year 2	Year 3	Year 4
Sales Volume		7,000	7,000	4,000	4,000
Plant Investment	$250 Mil
Alternative Land Use	$15 Mil
Plant Capacity	10,000 cars
Project life	4 years
Percentage of Debt Financing	50%
Interest Rate	7%
Tax rate	40%
NWC as % of direct manufacturing costs	5%
Monza Sales Cannibalization	1,000 cars
Electricity cost	$0.07 per kWh	70% of national average
Carbon Body Cost per Car	$14,000
Percentage of electricity	80%
Electricity used per car
Other Spenza direct costs
Body materials (other than electricity)
Engine	$4,000
Drivetrain	$6,000
Battery Pack	$15,000
Electronics	$5,000
Solution
Choosing Depreciation
		Year 1	Year 2	Year 3	Year 4
Straight-Line depreciation
MACRS Depreciation
Your recommendation
Projected Net Income
		Year 1	Year 2	Year 3	Year 4
Sales Volume		7,000	7,000	4,000	4,000
Projected electricity cost (per kWh)
Revenues
Direct Costs
Body materials (electricity only)
Body materials (other than electricity)
Engine
Drivetrain
Battery Pack
Electronics
Total Direct Costs
Fixed Costs
Labor
Overheads
Depreciation
EBIT
Interest
EBT
Taxes
Net Income
Projected FCF
Monzas Lost Profit
Volume	1,000 cars
Price	$65,000
Direct Costs (per car)
Lost Profit (After-Tax)
OCF
CapEx
Investment in NWC
Opportunity Costs
Alternative Land Use
Lost Profit from Cannibalized Sales
FCF
WACC (Next Tab)
NPV
IRR
Six Scenarios
		2015	2016	2017	2018
Reference		$0.0707	$0.0721	$0.0724	$0.0718
High Oil Price		$0.0715	$0.0721	$0.0726	$0.0724
Low Oil Price		$0.0705	$0.0722	$0.0725	$0.0721
High Oil and Gas Resource Availability		$0.0699	$0.0710	$0.0715	$0.0706
High Economic Growth		$0.0705	$0.0721	$0.0719	$0.0717
Low Economic Growth		$0.0710	$0.0720	$0.0715	$0.0704