Question
I only need help with part D so it is the only problem I included. IDK if the info from part a-c were needed, if
I only need help with part D so it is the only problem I included. IDK if the info from part a-c were needed, if so I can put in comments later. Please help explain how to get the graph and the number (or how to calculate this in excel. I am trying to set up my spread sheet. i have part a-c already set up to auto calculate once I put the numbers from the intro and table in. Thanks in advance!
Bauer Industries is an automobile manufacturer. Management is currently evaluating a proposal to build a plant that will manufacture lightweight trucks. Bauer plans to use a cost of capital of 12.5% to evaluate this project. Based on extensive research, it has prepared the following incremental free cash flow projections (in millions of dollars):
Year 0 1-9 10 Revenues 101.0 101.0 Manufacturing Expenses (other than depreciation) -34.4 -34.4 Marketing Expenses -10.6 -10.6 Depreciation -15.2 -15.2 EBIT 40.8 40.8 Taxes at 20% -8.16 -8.16 Unlevered Net Income 32.64 32.64 Depreciation +15.2 +15.2 Additions to Net Working Capital -5.3 -5.3 Capital Expenditures -152.0 Continuation Value +11.5 Free Cash Flow -152.0 42.540 54.040
d. To examine the sensitivity of this (base-case scenario) project to the discount rate, management would like to compute the NPV for different discount rates. Create a graph, with the discount rate on the x-axis and the NPV on the y-axis, for discount rates ranging from 5% to 30%. For what ranges of discount rates does the project have a positive NPV?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started