Bauer Industries is an automobile manufacturer Management is currently avaluating a proposal to build a plant that wil manufacture lightweight trucks Bauer plans to use a cost of capital of 11.6% to evaluate this project. Based on extensive research, it has prepared the following incremental free cash flow projections (in Millions of dollars) a. For this base-case scenario, what is the NPV of the plant to manufacture lightweight trucks? b. Based on input from the marketing department, Bauer is uncertain about its revenue forecast. In particular, management would like to examine the sensitivity of the NPV to the revenue assumption. What is the NPV of this project revenues are 10% higher than forecast? What is the NPV If revenues are 10% lower than forecast? c. Rather than assuming that cash flows for this project are constant, management would like to explore the sensitivity of its analysis to possible growth in revenues and operating expenses. Specifically, management would like to assume that revenues, manufacturing expenses, and marketing expenses are as given in the table for your 1 and grow by 2% per year every year starting in year 2. Management also plans to assume that the initial capital expenditures and therefore depreciation), addition to working capital, and continuation value remain as initially specified in the table. What is the NPV of this project under these alternative assumptions? How does the NPV change if the revenues and operating expenso grow by 8% per year rather than by 2%? d. To examine the sensitivity of this (base-case sonnerio) project to the discount rate, management would like to compute the NPV for different discount rates. Create graph with the discount rate on the x-axis and the NPV on the yards for discount rates ranging from 5% to 30%. For what ranges of discount rates does the project have a . For this case scenario, what is the NPV of the plant to manufacture lightweight trucks? The NPV of the estimated free cash flow is 5 million (Round to two decimal places) : Module 7: Chapter 8 - Capital Budgeting 12 of 12 (10 complete) HW Score Q to tomobile manufacturer. Management is currently evaluating a proposal to build a plant that will manufacture lightweight trucks. (in mil i Data Table X send the tion ng (Click on the following icon in order to copy its contents into a spreadsheet.) the ser Er than rowth it en in the bciation hs? How pech antin sand nitivt untral count bs does Year Revenues Manufacturing Expenses (other than depreciation) Marketing Expenses Depreciation EBIT Taxes at 20% Unlevered Net Income Depreciation Additions to Net Working Capital Capital Expenditures Continuation Value Free Cash Flow 1-9 104.0 - 33.5 - 10.6 - 15.3 44.6 -8.92 35.68 + 15.3 -5.6 10 104.0 -335 -10.6 - 15.3 44.6 -8.92 35.68 +15.3 -5.6 scer mated - 153.0 11.5 56.880 - 153.0 45.380 Print Done in the Clear All Check Ans 28 dity Bauer Industries is an automobile manufacturer, Management is currently evaluating a proposal to build a plant that will manufacture lightweight trucks. Bauer plans to use a cost of capital of 11 8% to evaluate this project. Based on extensive research. It has prepared the following incremental free cash flow projections in milions of dollars) a. For this base-case scenario, what is the NPV of the plant to manufacture lightweight trucks? . Based on input from the marketing department, Bauer is uncertain about its revenue forecast. In particular, management would like to examine the sensitivity of the NPV to the revenue assumptions What is the NPV of this projectif revenues are 10% higher than forecast? What is the NPV if revenues are 10% wer than forecast? e. Rather than cuming that cash flows for this project are constant management would like to explore the sensitivity of its analysis to possible growth in revenues and operating expenses Spania management would like to assume that revenues, manufacturing expenses, and marketing companies are given in the table for year 1 and grow by 2% per year every year starting in year 2 Management to plans to me that the initial capital expenditures and therefore depreciation additions to working capital, and continuation value remain as initially specified in the table. What is the NPV of this project under these temative assumptions? How does the NPV change in the revenues and operwing expenses grow by 6% per year rather than by 27 d. To examine the sensitivity of this case-se nano) project to the discount rate management would like to compute the NPV for different discount rate Create a graph with the discount on the axis and the NPV on the y, for discount rates ranging from 5% to 30%. For what ranges of discount rates does the project have a positive NPV? For this basic conano what is the NPV of the plant to manufacture lightweight trucks The NPV of the estimated fete cash flow is 5 milion (Round to two decimal places.)