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Bauer industries is an automoblle manufacturer. Management is currently evaluating a proposal to build a plant that will manufacture lightwoight trucks. Bauor plans to use

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Bauer industries is an automoblle manufacturer. Management is currently evaluating a proposal to build a plant that will manufacture lightwoight trucks. Bauor plans to use a cost of capital of 12% to evaluate this project. Based on extensive research, it has prepared the following incremental froe cash flow projoctions fin 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, Baver is uncertain about its revenue forecast. In particular, managament would like to examine the senaitivify of the NPV to the revenue assumptions. What is the NPV of this project if revenues are 10% higher than forecast? What is the NPV if rovenues are 10% lower than forecast? c. Rather than assuming that cash flows for this project are constant, management would fike to explore the sensilivity of its analysis to possible growth in revenues and operating expenses. Specifically, manngement would like to assume that rerenues, manufacturing expenses, and marketing expenses are as given in the table for year 1 and grow by 3% por year every year starting in year 2 . Managementalso plans to assume that the inital capital expenditures (and therefore depreciation), additions to working capital, and continuation value remain as initaly 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 expenses grow by 5% per year rather than by 3% ? d. To examine the sensitivity of this (base-case scenario) project to the discount rate, management would like to compute the NPPV for different discount rafes. Create a graph, 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 a. For this base-case scenario, what is the NPV of the plant to manufacture lightweight trucks? The N Data table (Click on the following icon in crder to copy is contents into a spreadsheet)

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