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 12% to evaluate this project. Based on extensiveresearch, it has prepared the following incremental free cash flow projections(in millions ofdollars):

Year 0 1-9 10

Revenues 104.0 104.0

Manufacturing Expenses(other thandepreciation) 36.3 36.3

Marketing Expenses 9.7 9.7

Depreciation 15.2 15.2

EBIT 42.8 42.8

Taxes at 20% 8.56 8.56

Unlevered Net Income 34.24 34.24

Depreciation +15.2 +15.2

Additions to Net Working Capital 5.7 5.7

Capital Expenditures 152.0

Continuation Value +12.6

Free Cash Flow 152.0 43.740 56.340

a. For thisbase-case scenario, what is the NPV of the plant to manufacture lightweighttrucks? The NPV of the estimated free cash flow is $________million.(Round to two decimalplaces.)

b. Based on input from the marketingdepartment, Bauer is uncertain about its revenue forecast. Inparticular, management would like to examine the sensitivity of the NPV to the revenue assumptions. What is the NPV of this project if revenues are 10% higher thanforecast? What is the NPV if revenues are 10% lower thanforecast?

c. Rather than assuming that cash flows for this project areconstant, management would like to explore the sensitivity of its analysis to possible growth in revenues and operating expenses.Specifically, management would like to assume thatrevenues, manufacturingexpenses, and marketing expenses are as given in the table for year 1 and grow by 2% per year every year starting in year 2. Management also plans to assume that the initial capital expenditures(and thereforedepreciation), additions to workingcapital, and continuation value remain as initially specified in the table. What is the NPV of this project under these alternativeassumptions? How does the NPV change if the revenues and operating expenses grow by 5% per year rather than by 2%?

d. To examine the sensitivity of this(base-case scenario) project to the discountrate, management would like to compute the NPV for different discount rates. Make agraph, with the discount rate on the x-axis and the NPV on the y-axis, for discount rates ranging from 5% to 30%. For what ranges of discount rates does the project have a positiveNPV?