Buhler Industries is a farm implement manufacturer. Management is currently evaluating a proposal to build a...
Fantastic news! We've Found the answer you've been seeking!
Question:
![image text in transcribed](https://s3.amazonaws.com/si.experts.images/answers/2024/05/664fe82607971_805664fe8259c790.jpg)
Transcribed Image Text:
Buhler Industries is a farm implement manufacturer. Management is currently evaluating a proposal to build a plant that will manufacture lightweight tractors. Buhler plans to use a cost of capital of 12% to evaluate this project. Based on extensive research, it has prepared the following incomplete incremental free cash flow projections (in millions of dollars) Free Cash Flow (5000,000s) Revenues -Marketing expenses -Manufacturing expenses (other than depreciation) -CCA EBIT -Taxes (35%) Unlevered net income CCA -Increases in net working capital -Capital expenditures Continuation value Free cash flow Year 0 Years 1-9 Year 10 119.00 119.00 -30.00 -30.00 -10.00 -10.00 ? ' ? 2 ? ? ? 2 ? ? -5.00 -5.00 -148.00 11.00 -148.00 The relevant CCA rate for the capital expenditures is 15% Assume assets are never sold a. For this base-case scenario, what is the NPV of the plant to manufacture lightweight tractors? b. Based on input from the marketing department, Buhler is uncertain about its revenue forecast. In particular, management would like to examine the sensitivity 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 of this project if revenues are 10% lower than forecast? Using the indirect method requires a separate calculation of the CCA tax shield. What is the present value of the CCA tax shield? The present value of the CCA tax shield is $million (Round to two decimal places.) Buhler Industries is a farm implement manufacturer. Management is currently evaluating a proposal to build a plant that will manufacture lightweight tractors. Buhler plans to use a cost of capital of 12% to evaluate this project. Based on extensive research, it has prepared the following incomplete incremental free cash flow projections (in millions of dollars) Free Cash Flow (5000,000s) Revenues -Marketing expenses -Manufacturing expenses (other than depreciation) -CCA EBIT -Taxes (35%) Unlevered net income CCA -Increases in net working capital -Capital expenditures Continuation value Free cash flow Year 0 Years 1-9 Year 10 119.00 119.00 -30.00 -30.00 -10.00 -10.00 ? ' ? 2 ? ? ? 2 ? ? -5.00 -5.00 -148.00 11.00 -148.00 The relevant CCA rate for the capital expenditures is 15% Assume assets are never sold a. For this base-case scenario, what is the NPV of the plant to manufacture lightweight tractors? b. Based on input from the marketing department, Buhler is uncertain about its revenue forecast. In particular, management would like to examine the sensitivity 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 of this project if revenues are 10% lower than forecast? Using the indirect method requires a separate calculation of the CCA tax shield. What is the present value of the CCA tax shield? The present value of the CCA tax shield is $million (Round to two decimal places.)
Expert Answer:
Posted Date:
Students also viewed these corporate finance questions
-
3. Questions A venture capitalist (VC) is willing to invest 100m for 20% ownership of a start-up that is looking to achieve scale. All existing shares are common shares, and this deal would result in...
-
Consider six transactions T1, T2, T3, T4, and T5 with: T1 initiated at site S1 and spawning an agent at site S2, T2 initiated at site S3 and spawning an agent at site S1, T3 initiated at site S1 and...
-
Compare and contrast the two doctors styles of management and the apparent reflections of Theory X and Theory Y assumptions of each of the doctors. lop5
-
Why is product design important to operations costs? LO.1
-
Thomas Stafford owned four promissory notes. Payments on the notes were deposited into a bank account in the names of Stafford and his daughter, June Zink, jointly with a note on the account...
-
Determine the purchase price at the indicated time before maturity of the following bond redeemed at par shown in the table below. \ table [ [ Par Value,Bond Rate,Time Before Redemption,Yield...
-
Use the horizontal model or write the journal entry, for each of the following transactions and adjustments that occurred during the first year of operations at Kissick Co. a. Issued 260,000 shares...
-
How do these relevant legal principles apply: Duty of care Duty of obedience Duty of loyalty Shareholder Derivative suit Piercing the corporate veil...
-
what will you do as a hotel manager if a customer complained about bad service they received?
-
How do marketers use new products to maintain and grow their market share? Your response must include a specific example of a company that successfully grew its business or attracted a new target...
-
How do you encourage cross-functional synergy within your organization to break down silos and facilitate innovative solutions to complex challenges ?
-
1. what is intended internal resource strategies. How do you plan to develop or acquire resources (tangible and/or intangible) that would generate core competencies? What are examples of resource...
-
Find the impedance at an angular frequency of 10rad/sec of series RC circuit in which R=9.0ohm and C=2.5mf
-
Havel says the grocer doesnt believe what is on the sign and indeed, he says the grocers customers will barely notice it. But Havel maintains that the sign serves a specific function. How would you...
-
What is the primary criterion by which ac- counting information can be judged? (a) Consistency. (b) Predictive value. (c) Usefulness for decision making. (d) Comparability. AppendixLO1
-
Generally accepted accounting principles are: (a) a set of standards and rules that are recog- nized as a general guide for financial reporting. (b) usually established by the Internal Revenue...
-
What is liquidity? How can it be measured using a classified balance sheet? AppendixLO1
![Mobile App Logo](https://dsd5zvtm8ll6.cloudfront.net/includes/images/mobile/finalLogo.png)
Study smarter with the SolutionInn App