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 depreciated

in 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 tax

rate is $21\%.$

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

$8)$ 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$)$