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 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$($$$000,000$s$)$

Year $0$

Years $19$

Year $10$

Revenues

Manufacturing expenses$($other than$$ depreciation$)$

Marketing expenses

CCA

$?$

$?$

EBIT

$?$

$?$

Taxes $(35\%)$

$?$

$?$

Unlevered net income

$?$

$?$

CCA

$?$

$?$

Increases in net working capital

Capital expenditures

Continuation value

Free cash flow

$?$

$?$

The relevant CCA rate for the capital expenditures is $.$ 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 higher than$$ forecast? What is the NPV of this project if revenues are lower than$$ forecast?$$

Question content area bottom

Part $1$

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 $$$

$$

$25\mathrm{.}77$ million.$($Round to two decimal$$ places.$)$

Part $2$

a$.$ For this$$ base$-$case scenario, what is the NPV of the plant to manufacture lightweight

$$tractors$?$

The NPV is $$$

$$

enter your response here million. $($Round to two decimal$$ places.$)$evaluate this project. Based on extensive research, it has prepared the following incomplete incremental free cash flow projections $($in millions of dollars$)$:

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?

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 $$25\mathrm{.}77$ million. $($Round to two decimal places.$)$

a$.$ For this base$-$case scenario, what is the NPV of the plant to manufacture lightweight

tractors?

The NPV is $ million. $($Round to two decimal places.$)$