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 $12\%12\%$ 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 $1$dash$9$

Year $10$

Revenues

$118\mathrm{.}00118\mathrm{.}00$

$118\mathrm{.}00118\mathrm{.}00$

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

minus$32\mathrm{.}0032\mathrm{.}00$

minus$32\mathrm{.}0032\mathrm{.}00$

minus$$Marketing expenses

minus$11\mathrm{.}0011\mathrm{.}00$

minus$11\mathrm{.}0011\mathrm{.}00$

minus$$CCA

$?$

$?$

equals$=$EBIT

$?$

$?$

minus$$Taxes $(35\%)$

$?$

$?$

equals$=$Unlevered net income

$?$

$?$

plus$+$CCA

$?$

$?$

minus$$Increases in net working capital

minus$5\mathrm{.}005\mathrm{.}00$

minus$5\mathrm{.}005\mathrm{.}00$

minus$$Capital expenditures

minus$150\mathrm{.}00150\mathrm{.}00$

plus$+$Continuation value

$12\mathrm{.}0012\mathrm{.}00$

equals$=$Free cash flow

minus$150\mathrm{.}00150\mathrm{.}00$

$?$

$?$

The relevant CCA rate for the capital expenditures is $10\%10\%.$ 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 $10\%10\%$ higher than$$ forecast? What is the NPV of this project if revenues are $10\%10\%$ lower than$$ 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 $$$$22\mathrm{.}5922\mathrm{.}59$ million.$($Round to two decimal$$ 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