Expanding Production Capacity at Michelin

In December 2022, Michelin was evaluating Project Gemini, a $100 million investment to expand production capacity for agricultural rubber tracks in the United States, following demand growth driven by the shift from tires to tracks in modern farming. Students are asked to assess the incremental cash flows from the project and to determine an appropriate cost of capital. The case also demonstrates how corporate sustainability objectives can be integrated into capital budgeting through internal carbon pricing.