Bilingham Packaging is considering expanding its production capacity by purchasing a new machine, the XC-75. The cost of the XC-7504 2.71 milion. Unfortunately, installing this machine will take several months and will partially disrupt paraduction. The firm has just completed a S48,000 feasibility study to analyze the decision to buy the XC 750. resulting in the following estimates: - Marketing: Once the XC-750 is operational next year, the extra capacity is expected to generale $10.15 million per year in additional sales, which will continue for the 10 year life of the machine. - Operations. The disruption caused by the installation will decrease sales by $4.97 million this year. As with Bilinghuis existing producls, the cos! Of goods for the products produced by the XC-750 is expected to be 89% of their sale price. The increased production will also require increased in verilory on hand of $1.09 million during the life of the project, including year 0. - Hunan Resources. The expansion will require addilianal sales and adininistrative personnel at a cost of $1.97 niliori per year. Accowiling: The XC-750 will be deprecialed via the straight-ine method over the 10-year life of the machine. The firm expects receivable from the new sales to be 16% of revenues and payables to be 10% of the cost of goods sold. Bilinglaris marginal corporale lax rate is 35% a. Determine the incremental earnings from the purchase of the XC-750. b. Determine the free cash low from the purchase of the XC-750. c. If the appropriate cost of capital for the expansion is 9.9%, compute the NPV of the purchase. d. While the expected new sales will be $10.15 milion per year from the expansion, estimates range from $8.25 milion to $12.05 million. What is the NPV in the worst case? In the best case? e. What is the break-even level of new sales from the expansion? Voihat is the breakeven level for the cost of goods sold? 1. Bllingham could instead purchase the XC-300, which offers even greater capacity. The cost of the XC-900 is $4.04 million. The extra capacity would not be useful in the first two years of operation, but would allow for additional sales in years 3 through 10. What level of additional Sales (above the $10.15 million expected for the XC-750) per year in those years would justly purchasing the larger machine? a. Determine the incremental earrings from the purchase of the XC-750. Calculate the incrementaleamings from the purchase of the XC-750 below (with vs. wilsoul XC7750): (Round to the nearest dollar.) Incremental Effects Year 1-10 Sales Revenues Cost of Goods Sold S. G, and A Expenses Depreciation EBIT Taxes at 35% Unlevered Nel Income Bilingham Packaging is considering expanding its production capacity by purchasing a new machine, the XC-750. The cost of the XC-750 is $2.77 million. Unfortunately, installing this machine will take several inants and will partially disrupt production. The firm has just completed a $40,000 feasibility study to analyze the decision to buy the XC-750. resulting in the folowing estimates: - Marketing: Once the XC-750 is operational next year, the extra capacity is expected to generate $10.15 million per year in additional sales, which will continue for the 10-year life of the machine. Operations: The disruption caused by the installation wil decrease sales by S4.97 miliori this year. As with Bilingham's existing products, the cost of goods for the products produced by the XC-750 is expected to be 89% of their sale price. The increased production will also require increased inventory anhand of $1.09 million during the life of the project, including year 0. Harun ResoWCOS: The expansion will require additional sales and administrative personnel at a cost of $1.97 million per year. Accounting: The XC-750 will be depreciated via the straight line nielhau aver the 10 year life of the machine. The firin expects receivables from the new sales to be 18% of revenues and payables to be 10% of the cost of goods sold. Billinghan's marginal corporate tax rate is 35%. a. Determine the incremental earnings from the purchase of the XC 750. b. Determine the free cash flow from the purchase of the XC 750. c. If the appropriate cast af capital for the expansion is 9.9%, coincule the NPV of the purchase. d. While the expected new sales wil be $10.15 million per year froin the expansion, estimates range from 38.25 milion to S12.05 millon. What is the NPV in the worst case? In the best casa? e. What is the break even level of new sales from the expansion? What is the breakeven level for the cast af goods sold? f. Dillinghiarn could instead purchase the XC-900, which offers even greater capacily. The cost of the XC 900 is S4.04 milion. The extra capacity would not be useful in the first two years of operativni, bul would allow for addilicanal sales in years 3 through 10. What level of additional salu (above the S10.15 million expected for the XC 750) per year in those years would juslify purchasing the larger machine? b. Determine the free cash flow from the purchase of the XC-750. Calculale lhe free cash Now from the purchase of the XC-750 below (with vs. without XC7750): (Nole. the change in rel working capilal for year is equal to the surn of the change in 2000s receivable due to the decrease in sales, the change in inverlory due to the increase in invenilory slarting in year 0, and the change in accounts payable due to the decrease in cost of goods sold.) (Round lo the nearest dallar) Incremental Effects Year Unlevered Not Income Depreciation Capital Expenditures Change on Net Working Capital SL Free cash now c. If the appropriate cost of capital for the expansion is 9.8%, compute the NPV of the purchase. The NPV of the purchase is S . (Round to the nearest dollar.) d. While the expected new sales wil be $10.15 million per year from the expansion estimates range from $8.25 milion to S12.05 milion. What is the NPV in the worst case? In the best co? The NPV of the purchase for sales of $8.25 million is S . (Round to the nearest dollar.) The NPV of the purchase for sales of $12.05 milioni $ . (Round to the nearest dollar) e. What is the break-even level of new sales from the expansion? The break-even level of new sales from the expansion is $ . (Round to the nearest dollar.) What is the breakeven level for the cost of goods sold? The breakeven level for the cost of goods sold is % of sales. (Round to two decimal places.) f. Billingham could instead purchase the XC-900, which offers even greater capacity. The cost of the XC-900 is $4.04 million. The extra capacity would not be useful in the first two years of operation, but would allow for additional sales in years 3 through 10. What level of additional sales (above the $10.15 million expected for the XC-750) per year in those years would justify purchasing the larger machine? The additional sales would need to be $ . (Round to the nearest dollar.) Bilingham Packaging is considering expanding its production capacity by purchasing a new machine, the XC-75. The cost of the XC-7504 2.71 milion. Unfortunately, installing this machine will take several months and will partially disrupt paraduction. The firm has just completed a S48,000 feasibility study to analyze the decision to buy the XC 750. resulting in the following estimates: - Marketing: Once the XC-750 is operational next year, the extra capacity is expected to generale $10.15 million per year in additional sales, which will continue for the 10 year life of the machine. - Operations. The disruption caused by the installation will decrease sales by $4.97 million this year. As with Bilinghuis existing producls, the cos! Of goods for the products produced by the XC-750 is expected to be 89% of their sale price. The increased production will also require increased in verilory on hand of $1.09 million during the life of the project, including year 0. - Hunan Resources. The expansion will require addilianal sales and adininistrative personnel at a cost of $1.97 niliori per year. Accowiling: The XC-750 will be deprecialed via the straight-ine method over the 10-year life of the machine. The firm expects receivable from the new sales to be 16% of revenues and payables to be 10% of the cost of goods sold. Bilinglaris marginal corporale lax rate is 35% a. Determine the incremental earnings from the purchase of the XC-750. b. Determine the free cash low from the purchase of the XC-750. c. If the appropriate cost of capital for the expansion is 9.9%, compute the NPV of the purchase. d. While the expected new sales will be $10.15 milion per year from the expansion, estimates range from $8.25 milion to $12.05 million. What is the NPV in the worst case? In the best case? e. What is the break-even level of new sales from the expansion? Voihat is the breakeven level for the cost of goods sold? 1. Bllingham could instead purchase the XC-300, which offers even greater capacity. The cost of the XC-900 is $4.04 million. The extra capacity would not be useful in the first two years of operation, but would allow for additional sales in years 3 through 10. What level of additional Sales (above the $10.15 million expected for the XC-750) per year in those years would justly purchasing the larger machine? a. Determine the incremental earrings from the purchase of the XC-750. Calculate the incrementaleamings from the purchase of the XC-750 below (with vs. wilsoul XC7750): (Round to the nearest dollar.) Incremental Effects Year 1-10 Sales Revenues Cost of Goods Sold S. G, and A Expenses Depreciation EBIT Taxes at 35% Unlevered Nel Income Bilingham Packaging is considering expanding its production capacity by purchasing a new machine, the XC-750. The cost of the XC-750 is $2.77 million. Unfortunately, installing this machine will take several inants and will partially disrupt production. The firm has just completed a $40,000 feasibility study to analyze the decision to buy the XC-750. resulting in the folowing estimates: - Marketing: Once the XC-750 is operational next year, the extra capacity is expected to generate $10.15 million per year in additional sales, which will continue for the 10-year life of the machine. Operations: The disruption caused by the installation wil decrease sales by S4.97 miliori this year. As with Bilingham's existing products, the cost of goods for the products produced by the XC-750 is expected to be 89% of their sale price. The increased production will also require increased inventory anhand of $1.09 million during the life of the project, including year 0. Harun ResoWCOS: The expansion will require additional sales and administrative personnel at a cost of $1.97 million per year. Accounting: The XC-750 will be depreciated via the straight line nielhau aver the 10 year life of the machine. The firin expects receivables from the new sales to be 18% of revenues and payables to be 10% of the cost of goods sold. Billinghan's marginal corporate tax rate is 35%. a. Determine the incremental earnings from the purchase of the XC 750. b. Determine the free cash flow from the purchase of the XC 750. c. If the appropriate cast af capital for the expansion is 9.9%, coincule the NPV of the purchase. d. While the expected new sales wil be $10.15 million per year froin the expansion, estimates range from 38.25 milion to S12.05 millon. What is the NPV in the worst case? In the best casa? e. What is the break even level of new sales from the expansion? What is the breakeven level for the cast af goods sold? f. Dillinghiarn could instead purchase the XC-900, which offers even greater capacily. The cost of the XC 900 is S4.04 milion. The extra capacity would not be useful in the first two years of operativni, bul would allow for addilicanal sales in years 3 through 10. What level of additional salu (above the S10.15 million expected for the XC 750) per year in those years would juslify purchasing the larger machine? b. Determine the free cash flow from the purchase of the XC-750. Calculale lhe free cash Now from the purchase of the XC-750 below (with vs. without XC7750): (Nole. the change in rel working capilal for year is equal to the surn of the change in 2000s receivable due to the decrease in sales, the change in inverlory due to the increase in invenilory slarting in year 0, and the change in accounts payable due to the decrease in cost of goods sold.) (Round lo the nearest dallar) Incremental Effects Year Unlevered Not Income Depreciation Capital Expenditures Change on Net Working Capital SL Free cash now c. If the appropriate cost of capital for the expansion is 9.8%, compute the NPV of the purchase. The NPV of the purchase is S . (Round to the nearest dollar.) d. While the expected new sales wil be $10.15 million per year from the expansion estimates range from $8.25 milion to S12.05 milion. What is the NPV in the worst case? In the best co? The NPV of the purchase for sales of $8.25 million is S . (Round to the nearest dollar.) The NPV of the purchase for sales of $12.05 milioni $ . (Round to the nearest dollar) e. What is the break-even level of new sales from the expansion? The break-even level of new sales from the expansion is $ . (Round to the nearest dollar.) What is the breakeven level for the cost of goods sold? The breakeven level for the cost of goods sold is % of sales. (Round to two decimal places.) f. Billingham could instead purchase the XC-900, which offers even greater capacity. The cost of the XC-900 is $4.04 million. The extra capacity would not be useful in the first two years of operation, but would allow for additional sales in years 3 through 10. What level of additional sales (above the $10.15 million expected for the XC-750) per year in those years would justify purchasing the larger machine? The additional sales would need to be $ . (Round to the nearest dollar.)