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Bauer Industries is an automobile manufacturer Management is currently evaluating a proposal to build a plant that wil manufacture lightweight trucks Baer plans to use a cost of this project. Based on extensive research, it has prepared the incremental free cash flow projections shown below in millions of dollars of 12.15 to v 10 99.8 998 Manufacturing Expenses other than depreciation) Marketing Expenses Depreciation EBIT Taxes at 35% Unlevered Net Income Depreciation 149 Additions to Net Working Capital a. For this base-case scenario, what is the NPV of the plant to manufacture lightweight trucks? +149 49 The NPV of the plant to manufacture lightweight trucks, based on the estimated free cash flow is s milion (Round to two decimal places) b. Based on input from the marketing department, Bauer is uncertain about its revenue forecast. In particules management would like to examine the sensitivity of the NPV to the revendesumtions What is the NPV of this project if revenues are 12% higher than forecast? What is the NPV if revenues we 12 lower than forecast? The NP Vof this project if revenues are 12% higher than forecast is s milion (Round to two decimal places) The NPV of this project if revenues are 12% lower than forecast is million (Round to two decimal places) 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 and grow by 3% per year every year sting 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 inhaly specified in the table. What is the NPV of this propec Enter your answer in each of the answer boxes -1486 Capital Expenditures Continuation Value Free Cash Flow 36.5 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 revenue forecast. In particular, management would like to examine the sensitivity of the NPV to the revenue is the NPV of this project if revenues sumptions What 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 opening 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 your 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 6% per year rather than by 3%? d. To examine the sensitivity of this project to the discount rate management would ke 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 a. For this base-case scenario, what is the NPV of the plant to manufacture lightweight trucks? The NPV of the plant to manufacture lightweight trucks, based on the estimated free cash flow is s milion (Round to two decimal places.) 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 revenues e 12% lower than forecast? The NPVof this project if revenues are 12% higher than forecast is $ million (Round to two decimal places) The NPV of this project if revenues are 12% lower than forecast is $ million (Round to two decimal places) 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 Bauer Industries is an automobile manufacturer Management is currently e n ga prosto build a plant that will manufacture lightweight rucks Bauer plans to use a cost of capital of 12.15 the proxect Based on extensive research has prepared the incrementare cashow reactions shown below i ons of dollars Revenues Manufacturing Expenses other than depreciation) Marketing Expenses Depreciation 998 - 38 -93 105 998 - 348 -93 EBIT 403 Taxes at 35% Unilevered Net Income Depreciation Additions to Net Working Capital 149 -1486 Capital Expenditures Continuation Value Free Cash Flow + 12.1 - 1486 365 a. For this base-case scenario, what is the NPV of the plant to manufacture lightweight trucks? bons What b. Based on input from the marketing department, Bauer is uncertain about its revenue forecast in particule management would like to examine the sensitivity of the NPV to the revenue is the NPV of this projectif revenues are 12% higher than forecast? What is the NPV 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 Specially management would like to assume that revenues, manufacturing expenses and marketing expenses we given in the table for year 1 and grow by 3% per year every year wing in year 2. Management also plans to assume that the initial capital expenditures and therefore depreciation), additions to working capital and continuation value remain asinbally 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 6% per year rather than by 3%? countries. Create a graph with the discount robe on the x-axis and the NPV on the d. To examine the sensitivity of this project to the discount rate management would like to compute the NPV for different yaxis, for discount rates ranging 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 revenge assumptions What is the NPV of this projectif 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 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 analysis to possible growth in revenues and operating expenses. Specifically also plans to assume that the initial capital expenditures and therefore depreciation additions to working capital and continuation value roman as initially specified in the table. What is the NPV of this projec under these alternative assumptions? How does the NPV change if the revenues and operating expenses grow by per year rather than by 3N? 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-adis and the NPV on the yaxis for discount rates ranging from 5% to 30%. For what ranges of discount rates does the project have a positive NPV? Bauer Industries is an automobile manufacturer Management is currently evaluating a proposal to build a plant that wil manufacture lightweight trucks Baer plans to use a cost of this project. Based on extensive research, it has prepared the incremental free cash flow projections shown below in millions of dollars of 12.15 to v 10 99.8 998 Manufacturing Expenses other than depreciation) Marketing Expenses Depreciation EBIT Taxes at 35% Unlevered Net Income Depreciation 149 Additions to Net Working Capital a. For this base-case scenario, what is the NPV of the plant to manufacture lightweight trucks? +149 49 The NPV of the plant to manufacture lightweight trucks, based on the estimated free cash flow is s milion (Round to two decimal places) b. Based on input from the marketing department, Bauer is uncertain about its revenue forecast. In particules management would like to examine the sensitivity of the NPV to the revendesumtions What is the NPV of this project if revenues are 12% higher than forecast? What is the NPV if revenues we 12 lower than forecast? The NP Vof this project if revenues are 12% higher than forecast is s milion (Round to two decimal places) The NPV of this project if revenues are 12% lower than forecast is million (Round to two decimal places) 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 and grow by 3% per year every year sting 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 inhaly specified in the table. What is the NPV of this propec Enter your answer in each of the answer boxes -1486 Capital Expenditures Continuation Value Free Cash Flow 36.5 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 revenue forecast. In particular, management would like to examine the sensitivity of the NPV to the revenue is the NPV of this project if revenues sumptions What 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 opening 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 your 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 6% per year rather than by 3%? d. To examine the sensitivity of this project to the discount rate management would ke 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 a. For this base-case scenario, what is the NPV of the plant to manufacture lightweight trucks? The NPV of the plant to manufacture lightweight trucks, based on the estimated free cash flow is s milion (Round to two decimal places.) 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 revenues e 12% lower than forecast? The NPVof this project if revenues are 12% higher than forecast is $ million (Round to two decimal places) The NPV of this project if revenues are 12% lower than forecast is $ million (Round to two decimal places) 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 Bauer Industries is an automobile manufacturer Management is currently e n ga prosto build a plant that will manufacture lightweight rucks Bauer plans to use a cost of capital of 12.15 the proxect Based on extensive research has prepared the incrementare cashow reactions shown below i ons of dollars Revenues Manufacturing Expenses other than depreciation) Marketing Expenses Depreciation 998 - 38 -93 105 998 - 348 -93 EBIT 403 Taxes at 35% Unilevered Net Income Depreciation Additions to Net Working Capital 149 -1486 Capital Expenditures Continuation Value Free Cash Flow + 12.1 - 1486 365 a. For this base-case scenario, what is the NPV of the plant to manufacture lightweight trucks? bons What b. Based on input from the marketing department, Bauer is uncertain about its revenue forecast in particule management would like to examine the sensitivity of the NPV to the revenue is the NPV of this projectif revenues are 12% higher than forecast? What is the NPV 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 Specially management would like to assume that revenues, manufacturing expenses and marketing expenses we given in the table for year 1 and grow by 3% per year every year wing in year 2. Management also plans to assume that the initial capital expenditures and therefore depreciation), additions to working capital and continuation value remain asinbally 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 6% per year rather than by 3%? countries. Create a graph with the discount robe on the x-axis and the NPV on the d. To examine the sensitivity of this project to the discount rate management would like to compute the NPV for different yaxis, for discount rates ranging 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 revenge assumptions What is the NPV of this projectif 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 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 analysis to possible growth in revenues and operating expenses. Specifically also plans to assume that the initial capital expenditures and therefore depreciation additions to working capital and continuation value roman as initially specified in the table. What is the NPV of this projec under these alternative assumptions? How does the NPV change if the revenues and operating expenses grow by per year rather than by 3N? 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-adis and the NPV on the yaxis for discount rates ranging from 5% to 30%. For what ranges of discount rates does the project have a positive NPV

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