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 $1$

$9$ Year $10$

Revenues $111\mathrm{.}00111\mathrm{.}00$

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

$34\mathrm{.}00$

$34\mathrm{.}00$

$$Marketing expenses $$

$12\mathrm{.}00$

$12\mathrm{.}00$

$$CCA $??$

$=$EBIT $??$

$$Taxes $(35\%)??$

$=$Unlevered net income $??$

$+$CCA $??$

$$Increases in net working capital $$

$5\mathrm{.}00$

$5\mathrm{.}00$

$$Capital expenditures $$

$150\mathrm{.}00$

$+$Continuation value $10\mathrm{.}00$

$=$Free cash flow $$

$150\mathrm{.}00??$

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$?$