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 11.5 % to evaluate this project. Based on extensiveresearch, it has prepared the following incremental free cash flow projections(in millions ofdollars):

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a. For thisbase-case scenario, what is the NPV of the plant to manufacture lightweighttrucks?

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 8% higher thanforecast? What is the NPV if revenues are 8% 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 project to the discountrate, management would like to compute the NPV for different discount rates. Examine tthe 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? (***Round to two decimal points***)

Table to reference is below:

Years 0 1-9 10

Revenues 97 97

Manufacturing Expenses (other than depreciation) -35.2 -35.2

Marketing Expenses -10.1 -10.1

Depreciation -15.4 -15.4

EBIT 36.3 36.3

Taxes at 34% -12.342 -12.342

Unlevered Net Income 23.958 23.958

Depreciation 15.4 15.4

Additions to Net Working Capital -4.6 -4.6

Capital Expenditures -154

Continuation Value 12.6

Free Cash Flow -154 34.758 47.358