90.2K

Verified Solution

Link Copied!

Help fast please!!

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 12.2% to evaluate this project. Based on extensive research, it has prepared the incremental free cash flow projections shown below (in millions of dollars): Year 0 1-9 10 100.9 - 34.8 -9.9 - 14.8 Revenues 100.9 Manufacturing Expenses (other than depreciation) - 34.8 Marketing Expenses -9.9 Depreciation 14.8 EBIT 41.4 Taxes at 35% - 14.5 Unlevered Net Income 26.9 Depreciation + 14.8 Additions to Net Working Capital -5.9 a. For this base-case scenario, what is the NPV of the plant to manufacture lightweight trucks? 41.4 - 14.5 26.9 + 14.8 -5.9 The NPV of the plant to manufacture lightweight trucks, based on the estimated free cash flow is $ million. (Round to two decimal places.) 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 12.2% to evaluate this project. Based on extensive research, it has prepared the incremental free cash flow projections shown below (in millions of dollars): Year 0 1-9 10 100.9 - 34.8 -9.9 - 14.8 Revenues 100.9 Manufacturing Expenses (other than depreciation) - 34.8 Marketing Expenses -9.9 Depreciation 14.8 EBIT 41.4 Taxes at 35% - 14.5 Unlevered Net Income 26.9 Depreciation + 14.8 Additions to Net Working Capital -5.9 a. For this base-case scenario, what is the NPV of the plant to manufacture lightweight trucks? 41.4 - 14.5 26.9 + 14.8 -5.9 The NPV of the plant to manufacture lightweight trucks, based on the estimated free cash flow is $ million. (Round to two decimal places.)

Answer & Explanation Solved by verified expert

See Answer