Please note that this is an INDIVIDUAL project. You have recently assumed the role of CFO at your company. The company's CEO is looking to expand its operations by investing in new property, plant, and equipment. You are asked to do some capital budgeting analysis that will determine whether the company should invest in these new plant assets.
Select a company, download the most recent copy of the company's 10-K report.
1.) 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.)
2.) 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.
3.)The annual EBIT for this new project will be 18% of the project's cost.
4.) The company will use the straight-line method to depreciate this equipment. Also assume that there will be no increases in net working capital each year. Use 35% as the tax rate in this project.
5.) The hurdle rate for this project will be the WACC that you are able to find on a financial website, such as Gurufocus.com. If you are unable to find the WACC for a company, contact your instructor. He or she will assign you a WACC rate.
Apple Inc. CONSOLIDATED BALANCE SHEETS (In millions, except number of shares which are reflected in thousands and par value) September 29, 2018 September 30, 2017 ASSETS: $ Current assets: Cash and cash equivalents Marketable securities Accounts receivable, net Inventories Vendor non-trade receivables Other current assets Total current assets 25,913 40,388 23,186 3,956 25,809 12,087 131,339 20,289 53,892 17,874 4,855 17,799 13,936 128,645 Non-current assets: Marketable securities Property, plant and equipment, net Other non-current assets Total non-current assets Total assets 170,799 41,304 22,283 234,386 365,725 194,714 33,783 18,177 246,674 375,319 ADULTIPRAUSLAPUOLDALUT LIABILITIES AND SHAREHOLDERS' EQUITY: 55,888 $ 32,687 Current liabilities: Accounts payable Other current liabilities Deferred revenue Commercial paper Term debt Total current liabilities 7,543 11,964 8,784 116,866 44,242 30,551 7,548 11,977 6,496 100,814 Non-current liabilities: Deferred revenue Term debt Other non-current liabilities Total non-current liabilities Total liabilities 2,797 93,735 45,180 141,712 258,578 2,836 97,207 40,415 140,458 241,272 Commitments and contingencies Shareholders' equity: Common stock and additional paid-in capital, $0.00001 par value: 12,600,000 shares authorized; 4,754,986 and 5,126,201 shares issued and outstanding, respectively Retained earnings Accumulated other comprehensive income/loss) Total shareholders' equity Total liabilities and shareholders' equity 40,201 70,400 (3,454) 107,147 365,725 35,867 98,330 (150) 134,047 375,319 See accompanying Notes to Consolidated Financial Statements. Apple Inc. CONSOLIDATED STATEMENTS OF OPERATIONS (In millions, except number of shares which are reflected in thousands and per share amounts) Net sales Cost of sales Gross margin September 29, 2018 265,595 163,756 101,839 Years ended September 30, 2017 229,234 141,048 88,186 Operating expenses: Research and development Selling, general and administrative Total operating expenses 14,236 16,705 30,941 11,581 15,261 26,842 Operating income Other income (expense), net Income before provision for income taxes Provision for income taxes Net income 70,898 2,005 72,903 13,372 59,531 61,344 2,745 64,089 15,738 48,351 Earnings per share: Basic Diluted 12.01 11.91 9.27 9.21 $ Shares used in computing earnings per share: Basic Diluted 4,955,377 5,000,109 5,217.242 5,251,692 Apple Inc. CONSOLIDATED BALANCE SHEETS (In millions, except number of shares which are reflected in thousands and par value) September 29, 2018 September 30, 2017 ASSETS: $ Current assets: Cash and cash equivalents Marketable securities Accounts receivable, net Inventories Vendor non-trade receivables Other current assets Total current assets 25,913 40,388 23,186 3,956 25,809 12,087 131,339 20,289 53,892 17,874 4,855 17,799 13,936 128,645 Non-current assets: Marketable securities Property, plant and equipment, net Other non-current assets Total non-current assets Total assets 170,799 41,304 22,283 234,386 365,725 194,714 33,783 18,177 246,674 375,319 ADULTIPRAUSLAPUOLDALUT LIABILITIES AND SHAREHOLDERS' EQUITY: 55,888 $ 32,687 Current liabilities: Accounts payable Other current liabilities Deferred revenue Commercial paper Term debt Total current liabilities 7,543 11,964 8,784 116,866 44,242 30,551 7,548 11,977 6,496 100,814 Non-current liabilities: Deferred revenue Term debt Other non-current liabilities Total non-current liabilities Total liabilities 2,797 93,735 45,180 141,712 258,578 2,836 97,207 40,415 140,458 241,272 Commitments and contingencies Shareholders' equity: Common stock and additional paid-in capital, $0.00001 par value: 12,600,000 shares authorized; 4,754,986 and 5,126,201 shares issued and outstanding, respectively Retained earnings Accumulated other comprehensive income/loss) Total shareholders' equity Total liabilities and shareholders' equity 40,201 70,400 (3,454) 107,147 365,725 35,867 98,330 (150) 134,047 375,319 See accompanying Notes to Consolidated Financial Statements. Apple Inc. CONSOLIDATED STATEMENTS OF OPERATIONS (In millions, except number of shares which are reflected in thousands and per share amounts) Net sales Cost of sales Gross margin September 29, 2018 265,595 163,756 101,839 Years ended September 30, 2017 229,234 141,048 88,186 Operating expenses: Research and development Selling, general and administrative Total operating expenses 14,236 16,705 30,941 11,581 15,261 26,842 Operating income Other income (expense), net Income before provision for income taxes Provision for income taxes Net income 70,898 2,005 72,903 13,372 59,531 61,344 2,745 64,089 15,738 48,351 Earnings per share: Basic Diluted 12.01 11.91 9.27 9.21 $ Shares used in computing earnings per share: Basic Diluted 4,955,377 5,000,109 5,217.242 5,251,692
