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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
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 11.9% to evaluate this project. Based on extensive research, it has prepared the incremental free cash flow projections shown below (in millions ofdollars):
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1-9 10 Year Revenues Manufacturing Expenses (other than depreciation) Marketing Expenses Depreciation EBIT Taxes at 35% Unlevered Net Inconm Depreciation Additions to Net Working Capital Capital Expenditures Continuation Value Free Cash Flow 0 103.6 -33.3 -10.1 -15.1 45.1 - 15.8 29.3 15.1 103.6 - 33.3 10.1 - 15.1 45.1 - 15.8 29.3 15.1 150.5 + 11.9 50.8 50.5 38.9Step by Step Solution
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