The company is now looking to expand its operations and wants you to do some analysis using key capital budgeting tools. The parameters are:

The company is now looking to expand its operations and wants you to do some analysis using key capital budgeting tools. The parameters are:.

The firm is looking to expand its operations by 10% of the firm’s net property, plant, and equipment. (Calculate this amount by taking 10% of the property, plant, and equipment figure that appears on the firm’s balance sheet.)

The estimated life of this new property, plant, and equipment will be 12 years. The salvage value of the equipment will be 5% of the property, plant and equipment’s cost.

The annual EBIT for this new expansion will be 18% of the cost.

The straight-line method will be used to depreciate this equipment. Also assume that there will be no increases in net working capital each year. 35% is the tax rate.

Convert the EBIT to free cash flow for the next 12 years.                         

See financial info:

Financial Ratio                   Calculation                                   2017

Profitability ratio

Gross Margin Percentage 110,855 – 45,583/110,855*100