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please show calculations and help me solve the three questions. I appreciate your help Bauer Industries is an automobile manufacturer. Management is currently evaluating a

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please show calculations and help me solve the three questions. I appreciate your help

image text in transcribed 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 11.7% to evaluate this project. Based on extensive research, it has prepared the incremental free cash flow projections shown below (in millions of dollars): Year Revenues Manufacturing Expenses (other than depreciation) Marketing Expenses Depreciation EBIT Taxes at 35% Unlevered Net Income Depreciation Additions to Net Working Capital Capital Expenditures Continuation Value Free Cash Flow 0 1-9 104.5 -34.3 -9.2 -14.9 46.1 -16.1 30 14.9 -4.1 10 104.5 -34.3 -9.2 -14.9 46.1 -16.1 30 14.9 -4.1 40.8 11.4 52.2 -149.3 -149.3 A For this base-case scenario, what is the NPV of the plant to manufacture lightweight trucks? B Based on input from the marketing department, Bauer 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 12 % higher than forecast? What is the NPV if revenues are 12 % lower than forecast? C. Rather than assuming that cash flows for this project are constant, management would like to explore the sensitivity of its analysis to possible growth in revenues and operating expenses. Specifically, management would like to assume that revenues, manufacturing expenses, and marketing expenses are as given in the table for year 1 and grow by 3% per year every year starting in year 2. Management also plans to assume that the initial capital expenditures (and therefore depreciation), additions to working capital, and continuation value remain as initially specified in the table. What is the NPV of this project under these alternative assumptions? How does the NPV change if the revenues and operating expenses grow by 5% per year rather than by 3%? D To examine the sensitivity of this 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? cture lightweight trucks? Billingham Packaging is considering expanding its production capacity by purchasing a new ma XC-750 is $2.75 million. Unfortunately, installing this machine will take several months and will has just completed a $50,000 feasibility study to analyze the decision to buy the XC-750, result bullet Marketing: Once the XC-750 is operational next year, the extra capacity is expected to g additional sales, which will continue for the 10-year life of the machine. bullet Operations: The disruption caused by the installation will decrease sales by $5.00 million existing products, the cost of goods for the products produced by the XC-750 is expected to be increased production will also require increased inventory on hand of $1.00 million during the li bullet Human Resources: The expansion will require additional sales and administrative perso year. bullet Accounting: The XC-750 will be depreciated via the straight-line method over the 10-yea receivables from the new sales to be 15% of revenues and payables to be 10% of the cost of g corporate tax rate is 35%. Billingham could instead purchase the XC-900, which offers even greater capacity. The cost of capacity would not be useful in the first two years of operation, but would allow for additional sa additional sales (above the $10.00 million expected for the XC-750) per year in those years wo machine? A What kind of knows real option machine provide to Billingham? B If Billingham that does it canthe sellXC-900 the XC-750 to another firm for $2.00 million in two years provide

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