Costco is now looking to expand its operations and wants you to do some analysis using key capital budgeting tools to do this. The parameters for this project are as follows.

- The firm is looking to expand its operations by 10% of the firms 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.

Balance Sheet

All numbers in thousands

Period Ending	9/3/2017	8/28/2016	8/30/2015
Current Assets
Cash And Cash Equivalents	4,546,000	3,379,000	4,801,000
Short Term Investments	1,233,000	1,350,000	1,618,000
Net Receivables	1,432,000	1,252,000	1,224,000
Inventory	9,834,000	8,969,000	8,908,000
Other Current Assets	272,000	268,000	228,000
Total Current Assets	17,317,000	15,218,000	16,779,000
Long Term Investments	-	-	-
Property Plant and Equipment	18,161,000	17,043,000	15,401,000
Goodwill	-	-	-
Intangible Assets	-	-	-
Accumulated Amortization	-	-	-
Other Assets	869,000	902,000	837,000
Deferred Long Term Asset Charges	-	-	-
Total Assets	36,347,000	33,163,000	33,017,000
Current Liabilities
Accounts Payable	13,272,000	11,110,000	12,292,000
Short/Current Long Term Debt	86,000	1,100,000	1,283,000
Other Current Liabilities	4,137,000	3,365,000	2,964,000
Total Current Liabilities	17,495,000	15,575,000	16,539,000
Long Term Debt	6,573,000	4,061,000	4,852,000
Other Liabilities	1,200,000	1,195,000	783,000
Deferred Long Term Liability Charges	-	-	-
Minority Interest	301,000	253,000	226,000
Negative Goodwill	-	-	-
Total Liabilities	25,569,000	21,084,000	22,400,000
Stockholders' Equity
Misc. Stocks Options Warrants	-	-	-
Redeemable Preferred Stock	-	-	-
Preferred Stock	-	-	-
Common Stock	4,000	2,000	2,000
Retained Earnings	5,988,000	7,686,000	6,518,000
Treasury Stock	-	-	-
Capital Surplus	5,800,000	5,490,000	5,218,000
Other Stockholder Equity	-1,014,000	-1,099,000	-1,121,000
Total Stockholder Equity	10,778,000	12,079,000	10,617,000
Net Tangible Assets	10,778,000	12,079,000	10,617,000

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 equipments cost.

- The annual EBIT for this new project will be 18% of the projects cost.

Deliverable for this Project:

a. Calculations for the amount of property, plant, and equipment and the annual depreciation for the project

b. Calculations that convert the projects EBIT to free cash flow for the 12 years of the project.

The following capital budgeting results for the project:

- Net present value

- Internal rate of return

- Discounted payback period.

The discussion of the results that you calculated above, including a recommendation for acceptance or rejection of the project