Toyota Motor Company is expanding the production of their gas-electric hybrid drive systems and plans to shift production in the United States. To enable the expansion, they are contemplating investing $1.5 billion in a new plant with an expected 10-year life. The anticipated free cash flows from the new plant would be $220 million the first year of operation and grow by 10% for each of the next two years and then 5% per year for the remaining seven years. As a newly hired MBA in the capital budgeting division, you have been asked to evaluate the new project using the WACC, Adjusted Present Value, and Flow-to-Equity methods. You will compute the appropriate costs of capital and the net present values with each method. Because this is your first major assignment with the firm, they want you to demonstrate that you are capable of handling the different valuation methods. You must seek out the information necessary to value the free cash flows but will be provided some directions to follow. (This is an involved assignment, but at least you don’t have to come up with the actual cash flows for the project!)

1. Go to Yahoo! Finance (finance.yahoo.com) and get the quote for Toyota (symbol: TM). 

a. Under “Financials,” click on the income statement. The income statements for the last three fiscal years will appear. Copy and paste the data into Excel. 

b. Go back to the Web page and select “Balance Sheets” from the top of the page. Repeat the download procedure for the balance sheets, then copy and paste them into the same worksheet as the income statements. 

c. Click “Historical prices” in the left column, and find Toyota’s stock price for the last day of the month at the end of each of the past three fiscal years. Record the stock price on each date in your spreadsheet.