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 firms 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 equipments cost .The annual EBIT for this new project will be 18% of the projects cost.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 the same marginal tax rate that you used in the Week 6 project.The hurdle rate for this project will be the WACC that you calculated in Week 6. The WACC was calculated as 6.7%

Income Statement:

All numbers in thousands

Revenue	9/30/2017	9/24/2016	9/26/2015
Total Revenue	229,234,000	215,639,000	233,715,000
Cost of Revenue	141,048,000	131,376,000	140,089,000
Gross Profit	88,186,000	84,263,000	93,626,000
Operating Expenses
Research Development	11,581,000	10,045,000	8,067,000
Selling General and Administrative	15,261,000	14,194,000	14,329,000
Non Recurring	-	-	-
Others	-	-	-
Total Operating Expenses	-	-	-
Operating Income or Loss	61,344,000	60,024,000	71,230,000
Income from Continuing Operations
Total Other Income/Expenses Net	2,745,000	1,348,000	1,285,000
Earnings Before Interest and Taxes	64,089,000	61,372,000	72,515,000
Interest Expense	-	-	-
Income Before Tax	64,089,000	61,372,000	72,515,000
Income Tax Expense	15,738,000	15,685,000	19,121,000
Minority Interest	-	-	-
Net Income From Continuing Ops	48,351,000	45,687,000	53,394,000
Non-recurring Events
Discontinued Operations	-	-	-
Extraordinary Items	-	-	-
Effect Of Accounting Changes	-	-	-
Other Items	-	-	-
Net Income
Net Income	48,351,000	45,687,000	53,394,000
Preferred Stock And Other Adjustments	-	-	-
Net Income Applicable To Common Shares	48,351,000	45,687,000	53,394,000

Balance Sheet:

All numbers in thousands

Period Ending	9/30/2017	9/24/2016	9/26/2015
Current Assets
Cash And Cash Equivalents	20,289,000	20,484,000	21,120,000
Short Term Investments	53,892,000	46,671,000	20,481,000
Net Receivables	35,673,000	29,299,000	30,343,000
Inventory	4,855,000	2,132,000	2,349,000
Other Current Assets	13,936,000	8,283,000	15,085,000
Total Current Assets	128,645,000	106,869,000	89,378,000
Long Term Investments	194,714,000	170,430,000	164,065,000
Property Plant and Equipment	33,783,000	27,010,000	22,471,000
Goodwill	5,717,000	5,414,000	5,116,000
Intangible Assets	2,298,000	3,206,000	3,893,000
Accumulated Amortization	-	-	-
Other Assets	10,162,000	8,757,000	5,422,000
Deferred Long Term Asset Charges	-	-	-
Total Assets	375,319,000	321,686,000	290,345,000
Current Liabilities
Accounts Payable	74,793,000	59,321,000	60,671,000
Short/Current Long Term Debt	18,473,000	11,605,000	10,999,000
Other Current Liabilities	7,548,000	8,080,000	8,940,000
Total Current Liabilities	100,814,000	79,006,000	80,610,000
Long Term Debt	97,207,000	75,427,000	53,329,000
Other Liabilities	40,415,000	36,074,000	33,427,000
Deferred Long Term Liability Charges	2,836,000	2,930,000	3,624,000
Minority Interest	-	-	-
Negative Goodwill	-	-	-
Total Liabilities	241,272,000	193,437,000	170,990,000
Stockholders' Equity
Misc. Stocks Options Warrants	-	-	-
Redeemable Preferred Stock	-	-	-
Preferred Stock	-	-	-
Common Stock	35,867,000	31,251,000	27,416,000
Retained Earnings	98,330,000	96,364,000	92,284,000
Treasury Stock	-	-	-
Capital Surplus	-	-	-
Other Stockholder Equity	-150,000	634,000	-345,000
Total Stockholder Equity	134,047,000	128,249,000	119,355,000
Net Tangible Assets	126,032,000	119,629,000	110,346,000

Week 6:

Week 6 solution:

roject-Calculating the Weighted Average Cost o Capital Once again, your team is the key financial management team for your company. The company's CEO is now looking to expand its operations by investing in new property, plant, and equipment. In order to effectively evaluate the project's effectiveness, you have been asked to determine the firm's weighted average cost of capital. To determine the cost of capital, here is what you have been asked to do. 1. Go to Yahoo Finance for the company you selected. (Be sure that your company has debt on their balance sheet. This will be required in your project.) om) and capture the income statement information Enter your company's name or ticker symbol. Your company's information should appear Click on the Financials tab, and select the income statement option. Three years' worth of income statements should appear. Copy and paste this data into a spreadsheet. Repeat step b. above for the balance sheets of the company Click on "Historical Prices." Capture the closing price of the stock as of the balance sheet date for the three fiscal years used in steps b and c above. a. b. C. d. 2. Calculate the Weighted Average Cost of Capital (WACC) for the company: a. Cost of Debt i. Determine the market value of the firm's debt issues. Be sure to review the firm's 10-K. Also, the website http://finra- rkets.morningstar.com/BondCenter may be of assistance. You will need to calculate the firm's composite YTM on its bonds. This can be achieved by calculating a weighted-average YTM for its bond issues. After calculating the YTM for the bond issues, calculate the firm's after-tax cost of debt. If the firm's marginal tax rate cannot be identified in its 10-K, assume that the tax rate will be 35%. ii. iii. b. Cost of Equity i. Calculate the firm's cost of equity using the capital asset pricing model (CAPM) The formula for the CAPM is r-x (Re ii. Assume the risk-free rate (r) is the current rate of 10-year U.S. Treasury Bonds. iii. Calculate the market rateRby calculating the market return on the Standard & Poor's 500 for the past 2 calendar years. The beta for the firm can be obtained from Yahoo! Finance. iv. c. Calculate the WACC Determine the market capitalization of the firm's common equity and preferred equity, if any Determine the firm's capital structure based on the market value of the firm's equity and debt. The market value of the firm's debt can be obtained from the Morningstar website, listed in the Cost of Debt section above. Calculate the WACC. As you recall, the formula for WACC is rwAcc +D+(E + D) ro(1-Tc). i. ii. iii. E (E+ D) roject-Calculating the Weighted Average Cost o Capital Once again, your team is the key financial management team for your company. The company's CEO is now looking to expand its operations by investing in new property, plant, and equipment. In order to effectively evaluate the project's effectiveness, you have been asked to determine the firm's weighted average cost of capital. To determine the cost of capital, here is what you have been asked to do. 1. Go to Yahoo Finance for the company you selected. (Be sure that your company has debt on their balance sheet. This will be required in your project.) om) and capture the income statement information Enter your company's name or ticker symbol. Your company's information should appear Click on the Financials tab, and select the income statement option. Three years' worth of income statements should appear. Copy and paste this data into a spreadsheet. Repeat step b. above for the balance sheets of the company Click on "Historical Prices." Capture the closing price of the stock as of the balance sheet date for the three fiscal years used in steps b and c above. a. b. C. d. 2. Calculate the Weighted Average Cost of Capital (WACC) for the company: a. Cost of Debt i. Determine the market value of the firm's debt issues. Be sure to review the firm's 10-K. Also, the website http://finra- rkets.morningstar.com/BondCenter may be of assistance. You will need to calculate the firm's composite YTM on its bonds. This can be achieved by calculating a weighted-average YTM for its bond issues. After calculating the YTM for the bond issues, calculate the firm's after-tax cost of debt. If the firm's marginal tax rate cannot be identified in its 10-K, assume that the tax rate will be 35%. ii. iii. b. Cost of Equity i. Calculate the firm's cost of equity using the capital asset pricing model (CAPM) The formula for the CAPM is r-x (Re ii. Assume the risk-free rate (r) is the current rate of 10-year U.S. Treasury Bonds. iii. Calculate the market rateRby calculating the market return on the Standard & Poor's 500 for the past 2 calendar years. The beta for the firm can be obtained from Yahoo! Finance. iv. c. Calculate the WACC Determine the market capitalization of the firm's common equity and preferred equity, if any Determine the firm's capital structure based on the market value of the firm's equity and debt. The market value of the firm's debt can be obtained from the Morningstar website, listed in the Cost of Debt section above. Calculate the WACC. As you recall, the formula for WACC is rwAcc +D+(E + D) ro(1-Tc). i. ii. iii. E (E+ D)