Bauer Industries is an automobile manufacturer Management is currently evaluating a proposal to build a plant that wil manufacture lightweight trucks Bauer plans to use a cost of capital of 11.7% to evaluate this project. Based on extensive research, it has prepared the incremental free cash flow projections shown below in milions 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 assumptions What is the NPV of this project if revenues are 12 higher than forecast? What is the NPV it revenues are 12% lower than forecast? c. Rather than assuring 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 be to assume that revenues, manufacturing expenses, and marketing expenses we 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 therefore depreciation), addons to working capital and continuation value remain as initial specified in the tabi What is the NPV of this project under these alternative assumptions? How does the NPV change it the revenues and operating expenses grow by per year rather than by 27 a. For this base-case scenario what is the NPV of the plant to manufacture lightweight trucha? The NPV of the plant to manufacture lightweight trucks, based on the estimated tree cash flow is milon Round to two decima pom.) b. Based on input from the marketing department, Bauer is uncertain about its revenue forecast in particular, management would like to examine the sensity of the NPV to the revenue assumptions. What is the NPV of this project if revenues are 12 higher than forecast? What is the NPV if revenues are 12 lower than forecast? Enter your answer in each of the answer boxes are 12% higher than forecast? What is the NPV il revenues & 12 lower 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 espeso Specifically, management would like to assume that revenues, manufacturing expenses, 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 therefore depreciation), addition to working capital and continuation we remain as intially specified in the table. What is the NPV of this project under these alternative assumptions? How does the NPV change of the revenues and operating expenses grow by es per year rather than by 27 d. To examine the sensitivity of this project to the discount rate management would like to compute the NPV for different discount rates Create a graph, with the discount rate on the x-m and the NPV on the yaxis, for discount rates ranging from 5 to 30%. For what ranges of discount rates does the project have a positive NPV? a. For this base-case scenario what is the NPV of the plant to manuacute tweight trucks? The NPV of the plant to manufacture giweight trucks, based on the estimated free cash flow is miton Round to two decades of the NPV to the revenue Data Table Year 0 1-9 100.6 - 37.2 10 100.6 - 37.2 - 10.1 - 15.4 Revenues Manufacturing Expenses (other than depreciation) Marketing Expenses Depreciation EBIT Taxes at 21% Unlevered Net Income Depreciation Additions to Net Working Capital Capital Expenditures Continuation Value Free Cash Flow - 10.1 - 15.4 37.9 -8.0 29.9 + 15.4 -4.3 37.9 - 8.0 29.9 + 15.4 -4.3 - 153.9 + 11.3 52.3 - 153.9 41.0 Print Done Bauer Industries is an automobile manufacturer Management is currently evaluating a proposal to build a plant that wil manufacture lightweight trucks Bauer plans to use a cost of capital of 11.7% to evaluate this project. Based on extensive research, it has prepared the incremental free cash flow projections shown below in milions 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 assumptions What is the NPV of this project if revenues are 12 higher than forecast? What is the NPV it revenues are 12% lower than forecast? c. Rather than assuring 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 be to assume that revenues, manufacturing expenses, and marketing expenses we 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 therefore depreciation), addons to working capital and continuation value remain as initial specified in the tabi What is the NPV of this project under these alternative assumptions? How does the NPV change it the revenues and operating expenses grow by per year rather than by 27 a. For this base-case scenario what is the NPV of the plant to manufacture lightweight trucha? The NPV of the plant to manufacture lightweight trucks, based on the estimated tree cash flow is milon Round to two decima pom.) b. Based on input from the marketing department, Bauer is uncertain about its revenue forecast in particular, management would like to examine the sensity of the NPV to the revenue assumptions. What is the NPV of this project if revenues are 12 higher than forecast? What is the NPV if revenues are 12 lower than forecast? Enter your answer in each of the answer boxes are 12% higher than forecast? What is the NPV il revenues & 12 lower 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 espeso Specifically, management would like to assume that revenues, manufacturing expenses, 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 therefore depreciation), addition to working capital and continuation we remain as intially specified in the table. What is the NPV of this project under these alternative assumptions? How does the NPV change of the revenues and operating expenses grow by es per year rather than by 27 d. To examine the sensitivity of this project to the discount rate management would like to compute the NPV for different discount rates Create a graph, with the discount rate on the x-m and the NPV on the yaxis, for discount rates ranging from 5 to 30%. For what ranges of discount rates does the project have a positive NPV? a. For this base-case scenario what is the NPV of the plant to manuacute tweight trucks? The NPV of the plant to manufacture giweight trucks, based on the estimated free cash flow is miton Round to two decades of the NPV to the revenue Data Table Year 0 1-9 100.6 - 37.2 10 100.6 - 37.2 - 10.1 - 15.4 Revenues Manufacturing Expenses (other than depreciation) Marketing Expenses Depreciation EBIT Taxes at 21% Unlevered Net Income Depreciation Additions to Net Working Capital Capital Expenditures Continuation Value Free Cash Flow - 10.1 - 15.4 37.9 -8.0 29.9 + 15.4 -4.3 37.9 - 8.0 29.9 + 15.4 -4.3 - 153.9 + 11.3 52.3 - 153.9 41.0 Print Done