SAXTON COMPANY

Balance Sheet

As of December 31, 2009

Assets

Cash $ 30,000

Accounts Receivable.. 350,000

Marketable Securities .. 50,000

Inventory. 370,000

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Total Current Assets. $ 800,000

Net Plant and Equipment.. 800,000

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Total Assets.$ 1,600,000

Liabilities and Stockholders Equity

Accounts Payable..$ 50,000

Notes Payable.. 250,000

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Total Current Liabilities..$ 300,000

Long Term Liabilities 300,000

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Total Liabilities ..$ 600,000

Common Stock. 400,000

Retained Earnings.. 600,000

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Total Stockholders Equity.$ 1,000,000

Total Liabilities and Stockholders Equity $ 1,600,000

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 If you are unable to find the WACC for a company, contact your instructor. He or she will assign you a WACC rate.
6. Calculations for the amount of property, plant, and equipment and the annual depreciation for the project
7. calculations that convert the project's EBIT to free cash flow for the 12 years of the project.
8. The following capital budgeting results for the project
   1. Net present value
   2. Internal rate of return
   3. Discounted payback period.