Background: Electro Motors (Electro) is considering a new project to produce electric vehicles for the Australian domestic market and international markets. It has identified a property/plant that was formerly used to build petrol fuelled motor vehicles that could be refitted at minimal cost to manufacture the new electric vehicles. Electro is targeting Australian metropolitan centres for initial sales and expanding into regional centres over the next five years. International demand for electric vehicles is being driven by China and Electro has been in negotiation to provide vehicles to the Chinese market in 2025.
Electro has made the following projections:
• In the first year 2,000 units will be sold and growing at 10% pa. • The price for each unit in the first year will be AU$50,000. This price will increase by 5% pa. • Variable costs are 70% of the sales price in the first year’s total revenue and grow by 8% each year. • Fixed costs are $5 mil
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