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Bauer Industries is an automobile manufacturer. Management is currently evaluating a proposal to build a plant that will manu

- 5.0 -5.0 - 150.0 Additions to Net Working Capital Capital Expenditures Continuation Value Free Cash Flow +12.0 48.0 - 150.0

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Answer #1

36 Free Cash Flow For year 1-9 - 36 For Year 10 48 Cash but flow in year o 150. Using Pv. P.V (Discated @124) you. Cash Flow.

Discount rate taken at 12%. Cash Flow from year 1-9 is constant and changes in year 10. Each Cash Flow Discounted to get Present Value.

Then total is through summation of individual PV'S. $166.58 million is the Net Present Value which is the answer for part a.

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