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Billingham Packaging is considering expanding its production capacity by purchasing a new machine, the XC-750. The cost of the XC-750 is $2.74 million. Unfortunately, installing this machine will take several months and will partially disrupt production. The firm has just completed a $45,000 feasibility study to analyze the decision to buy the XC-750, resulting in the following estimates: Marketing: Once the XC-750 is operational nextyear, the extra capacity is expected to generate $10.5 million per year in additional sales, which will continue for the ten-year life of the machine. bullet Operations: The disruption caused by the installation will decrease sales by $4.94 million this year. As with Billingham's existing products, the cost of goods for the products produced by the XC-750 is expected to be 71% of their sale price. The increased production will also require increased inventory on hand of $1.14 million during the life of the project, including year 0 and depleted in year 10. Human Resources: The expansion will require additional sales and administrative personnel at a cost of $1.97 million per year. bullet Accounting: The XC-750 will be depreciated via thestraight-line method over the ten-year life of the machine. The firm expects receivables from the new sales to be 14% of revenues and payables to be 11% of the cost of goods sold. Billingham'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 cost of capital for the expansion is 10.1%, compute the NPV of the purchase. d. While the expected new sales will be $10.05 million per year from the expansion, estimates range from $8.15 million to $11.95million. 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? If the firm believes that sales will not increase, but costs would be reduced by purchasing the newmachine, what is the break-even level for the cost of goods sold? f. Billingham could instead purchase theXC-900, which offers even greater capacity. The cost of the XC-900 is $3.94 million. The extra capacity would not be useful in the first two years of operation, but would allow for additional sales in years 3-10. What level of additional sales (above the $10.05 million expected for the XC-750) per year in those years would justify purchasing the larger machine? Determine the incremental earnings from the purchase of theXC-750. Calculate the incremental earnings from the purchase of theXC-750 below: (Round to the nearest dollar.) Billingham Packaging is considering expanding its production capacity by purchasing a new machine, the XC-750. The cost of the XC-750 is $2.74 million. Unfortunately, installing this machine will take several months and will partially disrupt production. The firm has just completed a $45,000 feasibility study to analyze the decision to buy the XC-750, resulting in the following estimates: Marketing: Once the XC-750 is operational nextyear, the extra capacity is expected to generate $10.5 million per year in additional sales, which will continue for the ten-year life of the machine. bullet Operations: The disruption caused by the installation will decrease sales by $4.94 million this year. As with Billingham's existing products, the cost of goods for the products produced by the XC-750 is expected to be 71% of their sale price. The increased production will also require increased inventory on hand of $1.14 million during the life of the project, including year 0 and depleted in year 10. Human Resources: The expansion will require additional sales and administrative personnel at a cost of $1.97 million per year. bullet Accounting: The XC-750 will be depreciated via thestraight-line method over the ten-year life of the machine. The firm expects receivables from the new sales to be 14% of revenues and payables to be 11% of the cost of goods sold. Billingham'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 cost of capital for the expansion is 10.1%, compute the NPV of the purchase. d. While the expected new sales will be $10.05 million per year from the expansion, estimates range from $8.15 million to $11.95million. 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? If the firm believes that sales will not increase, but costs would be reduced by purchasing the newmachine, what is the break-even level for the cost of goods sold? f. Billingham could instead purchase theXC-900, which offers even greater capacity. The cost of the XC-900 is $3.94 million. The extra capacity would not be useful in the first two years of operation, but would allow for additional sales in years 3-10. What level of additional sales (above the $10.05 million expected for the XC-750) per year in those years would justify purchasing the larger machine? Determine the incremental earnings from the purchase of theXC-750. Calculate the incremental earnings from the purchase of theXC-750 below: (Round to the nearest dollar.)