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

Year $0$

Years $19$

Year $10$

Revenues

$92\mathrm{.}00$

$92\mathrm{.}00$

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

$32\mathrm{.}00$

$32\mathrm{.}00$

$$Marketing expenses

$11\mathrm{.}00$

$11\mathrm{.}00$

$$CCA

$?$

$?$

$=$EBIT

$?$

$?$

$$Taxes $(35\%)$

$?$

$?$

$=$Unlevered net income

$?$

$?$

$+$CCA

$?$

$?$

$$Increases in net working capital

$5\mathrm{.}00$

$5\mathrm{.}00$

$$Capital expenditures

$153\mathrm{.}00$

$+$Continuation value

$12\mathrm{.}00$

$=$Free cash flow

$153\mathrm{.}00$

$?$

$?$

The relevant CCA rate for the capital expenditures is $20\%.$ 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?$$

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 $$$$30\mathrm{.}630\mathrm{.}6$ million.$($Round to two decimal$$ 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.$)$