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a. Determine the incremental earnings from the purchase of the TJ-SO. b. Determine the free cash flow from the purchase of the TJ-SO. c. If

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a. Determine the incremental earnings from the purchase of the TJ-SO. b. Determine the free cash flow from the purchase of the TJ-SO. c. If the appropriate cost of capital for the expansion is 10%, compute the NPV of the purchase. d. While the expected new sales will be $10 million per year from the expansion, estimates range from $8 million to $12 million. What is the NPV in the worst case? In the best case? e. What is the break-even level of new sales from the expansion? What is the break-even level for the cost of goods sold? f. IP could instead purchase the TJQO, which offers even greater capacity. The cost of the TJ-QO is $4 million. The extra capacity would not be useful in the first two years of operation, but would allow for additional sales in years 310. What level of additional sales (above the $10 million expected for the TJ-SO) per year in those years would justify purchasing the larger machine

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