Billingham Packaging is considering expanding its production capacity by purchasing a new machine, the XC-750. The cost of the XC-750 is 2.75$ million. Unfortunately, installing this machine will take several months and will partially disrupt production. The firm has just completed a 47 000$ feasibility study to analyze the decision to buy the XC-750, resulting in the following estimates: Marketing: Once the XC-750 is operating next year, the extra capacity is expected to generate 10.2 $ million per year in additional sales, which will continue for the ten-year life of the machine. Operations: The disruption caused by the installation will decrease sales by $5.5 million this year. As with Billingham's existing products, the cost of goods for the products produced by the XC-750 is expected to be 70% of their sale price. The increased production will also require increased inventory on hand of $1.02 million during the life of the project. The increased production will require additional inventory of $1.2 million, to be added in year 0 and depleted in year 10. Human Resources: The expansion will require additional sales and administrative personnel at a cost of $1.96million per year. Accounting: The XC-750 will be depreciated via the straight-line method in years 1-10. Receivables are expected to be14% of revenues and payables to be 9% of the cost of goods sold. Billingham's marginal corporate tax rate is 15%.a. Determine the incremental earnings from the purchase of the XC-750. Incremental Earnings year 0 sales revenue: -$5,050,000 cost of good sold: $3.535,000 S,G, and A expenses: $0 Depreciation: $0 EBIT: -$1,515,000 Taxes at 15%: $227,250 Unlevered net income ?? Year 1-10 Sales Revenue: $10,200,000 Cost of Good sold: -$7,140,000 S,G and A expenses: -$1,960,000 Depreciation: -$275,000 EBIT: $825,000 Taxes at 15%: -$123,750 Unlevered Net income: ???? b) Determine the free cash flow from the purchase of the XC-750. c) If the appropriate cost of capital for the expansion is 10.1% compute the NPV of the purchase d) While the expected new sales will be $10.2million per year from the expansion, estimates range from $8.15million to $12.25 million. What is the NPV in the worst case? In the best case? It may be helpful to work in excel.

disrupt production. The firm has just completed a $47,000 feasibility study to analyze the decision to buy the XC-750, resulting in the following estimates: - Marketing: Once the XC-750 is operating next year, the extra capacity is expected to generate $10.2 million per year in additional sales, which will continue for the ten-year life of the machine. year 10. - Human Resources: The expansion will require additional sales and administrative personnel at a cost of $1.96 million per year. 15%. a. Determine the incremental eamings from the purchase of the XC-750. inrramantal Farninne b. Determine the free cash flow from the purchase of the XC750. c. If the appropriate cost of capital for the expansion is 10.1%, compute the NPV of the purchase. d. While the expected new sales will be $10.2 million per year from the expansion, estimates range from $8.15 million to $12.25 million. What is the NPV in the worst case? In the best case? Tip: it may be helpful to work in Excel... a. Determine the incremental earnings from the purchase of the XC-750. Calculate the Unlevered Net Income from the purchase of the XC-750 below: (Round to the nearest dollar.) Unlevered Net Income Year 0= Unlevered Net Income Years 1-10 = (Round to the nearest dollar.) b. Determine the free cash flow from the purchase of the XC-750. Calculate the free cash flow from the purchase of the XC-750: (Round to the nearest dollar.) Incremental Free Cash Flow Incremental Free Cash Flow c. If the appropriate cost of capital for the expansion is 10.1%, compute the NPV of the purchase. The NPV of the purchase is ? (Round to the nearest dollar.) d. While the expected new sales will be $10.2 million per year from the expansion, estimates range from $8.15 million to $12.25 million. What is the NPV in the worst case? In the best case? The NPV of the purchase for sales of $8.15 million is $. (Round to the nearest dollar.) The NPV of the purchase for sales of $12.25 million is $ (Round to the nearest dollar.) disrupt production. The firm has just completed a $47,000 feasibility study to analyze the decision to buy the XC-750, resulting in the following estimates: - Marketing: Once the XC-750 is operating next year, the extra capacity is expected to generate $10.2 million per year in additional sales, which will continue for the ten-year life of the machine. year 10. - Human Resources: The expansion will require additional sales and administrative personnel at a cost of $1.96 million per year. 15%. a. Determine the incremental eamings from the purchase of the XC-750. inrramantal Farninne b. Determine the free cash flow from the purchase of the XC750. c. If the appropriate cost of capital for the expansion is 10.1%, compute the NPV of the purchase. d. While the expected new sales will be $10.2 million per year from the expansion, estimates range from $8.15 million to $12.25 million. What is the NPV in the worst case? In the best case? Tip: it may be helpful to work in Excel... a. Determine the incremental earnings from the purchase of the XC-750. Calculate the Unlevered Net Income from the purchase of the XC-750 below: (Round to the nearest dollar.) Unlevered Net Income Year 0= Unlevered Net Income Years 1-10 = (Round to the nearest dollar.) b. Determine the free cash flow from the purchase of the XC-750. Calculate the free cash flow from the purchase of the XC-750: (Round to the nearest dollar.) Incremental Free Cash Flow Incremental Free Cash Flow c. If the appropriate cost of capital for the expansion is 10.1%, compute the NPV of the purchase. The NPV of the purchase is ? (Round to the nearest dollar.) d. While the expected new sales will be $10.2 million per year from the expansion, estimates range from $8.15 million to $12.25 million. What is the NPV in the worst case? In the best case? The NPV of the purchase for sales of $8.15 million is $. (Round to the nearest dollar.) The NPV of the purchase for sales of $12.25 million is $ (Round to the nearest dollar.)