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$)$: The relevant CCA rate for the capital expenditures is $10\%.$ 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 $10\%$ higher than$$ forecast? What is the NPV of this project if revenues are $10\%$ lower than$$ forecast?Free Cash Flow$($$$000,000$s$)$

Year $0$ Years $1-9$ Year $10$

Revenues: year $1-9101\mathrm{.}00$ year $10101\mathrm{.}00$

Manufacturing expenses$($other than$$ depreciatio n$)-32\mathrm{.}00-32\mathrm{.}00$

Marketing expenses $-9\mathrm{.}00-9\mathrm{.}00$

CCA unknown

EBIT unkonw

Taxes $(35\%)$ unknown

Unlevered net income unknown

CCA unknown

Increases in net working capital $($year $1-9)-5\mathrm{.}00($year $10-)5\mathrm{.}00$

Capital expenditures $($year $0)-150\mathrm{.}00$

Continuation value $($year $10)11\mathrm{.}00$

Free cash flow $($year $0)-150\mathrm{.}00$

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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 $$$