Billingham Packaging is considering expanding its production capacity by purchasing a new machine, the XC-750. The cost of the XC-750 is $ 2.85$2.85 million. Unfortunately, installing this machine will take several months and will partially disrupt production. The firm has just completed a $ 45 comma 000$45,000 feasibility study to analyze the decision to buy the XC-750, resulting in the following estimates: bullet Marketing: Once the XC-750 is operational next year, the extra capacity is expected to generate $ 10.05$10.05 million per year in additional sales, which will continue for the 10-year life of the machine. bullet Operations: The disruption caused by the installation will decrease sales by $ 5.04$5.04 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 71 %71% of their sale price. The increased production will also require increased inventory on hand of $ 1.08$1.08 million during the life of the project, including year 0. bullet Human Resources: The expansion will require additional sales and administrative personnel at a cost of $ 1.99$1.99 million per year. bullet Accounting: The XC-750 will be depreciated via the straight-line method over the 10-year life of the machine. The firm expects receivables from the new sales to be 14 %14% of revenues and payables to be 10 %10% of the cost of goods sold. Billingham's marginal corporate tax rate is 35 %35%. a. Determine the incremental earnings from the purchase of the XC-750. b. Determine the free cash flow from the purchase of the XC-750. c. If the appropriate cost of capital for the expansion is 10.4 %10.4%, compute the NPV of the purchase. d. While the expected new sales will be $ 10.05$10.05 million per year from the expansion, estimates range from $ 7.95$7.95 million to$ 12.15$12.15 million. What is the NPV in the worst case? In the best case? e. What is the break-even level of new sales from the expansion? What is the breakeven level for the cost of goods sold? f. Billingham could instead purchase the XC-900, which offers even greater capacity. The cost of the XC-900 is $ 4.04$4.04 million. The extra capacity would not be useful in the first two years of operation, but would allow for additional sales in years 3 through 10. What level of additional sales (above the $ 10.05$10.05 million expected for the XC-750) per year in those years would justify purchasing the larger machine? a. Determine the incremental earnings from the purchase of the XC-750. Calculate the incremental earnings from the purchase of the XC-750 below (with vs. without XC?750):(Round to the nearest dollar.) Incremental Effects Year 0 Sales Revenues $ Cost of Goods Sold $ S, G, and A Expenses $ Depreciation $ EBIT $ Taxes at 35% $ Unlevered Net Income $ Enter