Bauer industries is an automobile manufacturer. management iscurrently evaluating a proposal ... Question: Bauer Industries isan automobile manufacturer. Management is currently evaluating aproposal to ... Bauer Industries is an automobile manufacturer.Management is currently evaluating a proposal to build a plant thatwill manufacture lightweight trucks. Bauer plans to use a cost ofcapital of 12.4% to evaluate this project. Based on extensive?research, it has prepared the incremental free cash flowprojections shown below? (in millions of? dollars):

year	0	1-9	10
Revenues		102.5	102.5
Manufacturing Expenses? (other than? depreciation)		-33.8	-33.8
Marketing Expenses		-10.4	-10.4
Depreciation		-15.0	-15.0
EBIT		43.3	43.3
Taxes at 35?%		-15.2	-15.2
Unlevered Net Income		28.1	28.1
Depreciation		+15.0	+15.0
Additions to Net Working Capital		-4.7	-4.7
Capital Expenditures	-149.7
Continuation Value			+12.4
Free Cash Flow	-149.7	38.4	50.8

a. For this? base-case scenario, what is the NPV of the plant tomanufacture lightweight?trucks? b. Based on input from themarketing? department, Bauer is uncertain about its revenueforecast. In? particular, management would like to examine thesensitivity of the NPV to the revenue assumptions. What is the NPVof this project if revenues are 8% higher than? forecast? What isthe NPV if revenues are 8% lower than? forecast? c. Rather thanassuming that cash flows for this project are? constant, managementwould like to explore the sensitivity of its analysis to possiblegrowth in revenues and operating expenses.? Specifically,management would like to assume that? revenues,manufacturing?expenses, and marketing expenses are as given in thetable for year 1 and grow by 3% per year every year starting inyear 2. Management also plans to assume that the initial capitalexpenditures? (and therefore? depreciation), additions to working?capital, and continuation value remain as initially specified inthe table. What is the NPV of this project under these alternative?assumptions? How does the NPV change if the revenues and operatingexpenses grow by 6%per year rather than by 3%?? d. To examine thesensitivity of this project to the discount? rate, management wouldlike to compute the NPV for different discount rates. Create a?graph, with the discount rate on the x?-axis and the NPV on they?-axis, for discount rates ranging from 5% to 30%. For what rangesof discount rates does the project have a positive? NPV?