I need help to validate my understanding of the following.

Assumptions:

I was assumptions that Starbucks is planning to expand its operations by 10% of firm' net property, plant, and equipment.

I calculated that amount by taking 10% of the above from the balance sheet.

The estimated life of this new property, plant, and equipment is 12 years.

The salvage value of the equipment is 5% of the property, plant and equipment's cost.

The annual EBIT for this new project is 18% of the project's cost.

The company uses the straight-line method to depreciate this equipment.

No increases in net working capital each year.

Used 25% as the tax rate in this project.

1. calculating for the amount of property, plant, and equipment and the annual depreciation for Starbucks using the most recent 10k report EBIT to free cash flow for the 12 years of the project

2. NPV

3. IRR

4. Profitability Index

Here are the findings:

Calculations for the Amount of Property, Plant, and Equipment and the Annual Depreciation for the Project:

According to Starbucks' most recent 10-K report, their total net property, plant, and equipment is $13,115,800,000.

calculated 10% of this to determine the amount of property, plant, and equipment the firm is looking to expand by: Amount of Property, Plant, and Equipment = 10% x $13,115,800,000 = $1,311,580,000

The annual depreciation for this project was calculated using the straight-line method.

Annual Depreciation Amount = (Project Cost - Salvage Value) / Project Life Project Cost = $1,311,580,000, Salvage Value = 5% x $1,311,580,000 = $65,579,000,

and Project Life = 12 Years Annual Depreciation Amount = (1,311,580,000 - 65,579,000) / 12 = $107,623,250

Calculations that Convert the Project's EBIT to Free Cash Flow for the 12 Years of the Project:

To calculate the projects free cash flow for each of the 12 years, calculated the EBIT and then subtracted taxes and the annual depreciation amount.

EBIT = 18% x Project Cost = 18% x $1,311,580,000 = $235,844,400 Taxes = Tax Rate x Depreciation Amount = 25% x $107,623,250 = $26,905,813 Annual Depreciation Amount = $107,623,250

Free Cash Flow = EBIT - Taxes - Depreciation Amount = $235,844,400 - $26,905,813 - $107,623,250 = $101,315,337

Capital Budgeting Results for the Project Net Present Value: Using the WACC (found on Gurufocus.com) of 6.42% and free cash flow from above, calculated the Net Present Value (NPV) of the project using the formula:

NPV = Free Cash Flow (1 + r)1 + Free Cash Flow (1 + r)2 + Free Cash Flow (1 + r)3.... + Free Cash Flow (1 + r)12 - Cost of Project; found that the NPV of the project: NPV = $57,700,500.71

Internal Rate of Return (IRR): Using the same free cash flow figures as above the IRR of the project is: IRR = 16.67%

Discounted Payback Period: Again, using the same free cash flow figures, the discounted payback period of the project is:

Discounted Payback Period = 4.82 Years