The company that is chosen for this project is ADIDAS and you must use the company most recent 10-K...

Question

The company that is chosen for this project is ADIDAS and you must use the company most recent 10-K report and in a power point form. I have uploaded an example of what is required

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.

Signature Assignment Parameters

By the end of Week 3 - select a company, download the most recent copy of the company's 10-K report, and submit your company choice to your professor for approval.

The parameters for the week 7 project deliverable are as follows.

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.)

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.

The annual EBIT for this new project will be 18% of the project's 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 35% as the tax rate in this project.

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.

Signature Assignment Deliverables

Prepare a narrated PowerPoint presentation that will highlight the following items.

Your calculations for the amount of property, plant, and equipment and the annual depreciation for the project

Your calculations that convert the project's EBIT to free cash flow for the 12 years of the project.

The following capital budgeting results for the project
- Net present value
- Internal rate of return
- Discounted payback period.

Your discussion of the results that you calculated above, including a recommendation for acceptance or rejection of the project

Once again, you may embed your Excel spreadsheets into your document. Be sure to follow APA standards for this project.

pptx-rmfret4c.pptx

Shakeel · Accepted Answer

Capital budgeting techniques are used to assess the project for its financial feasibility. A project generally comprises cash outflow in the terms of initial investment followed by a series of cash inflows till the life of the project. Such cash flows are projected on certain assumptions. Here in the case of Adidas Inc, the project of expansion of operations are also based on certain assumptions like –
· The firm is looking to expand its operations by 10% of the firm's net property, plant, and equipment. 
· 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.
· The annual EBIT for this new project will be 18% of the project's cost.
· The company will use the straight-line method to depreciate this equipment. Also there will be no increases in net working capital each year. 
· Tax rate is taken as 35%
· WACC or hurdle rate is taken as 3.65% on analyst’s estimate.
Therefore, on the basis on most recent company’s annual report, following projections are made-
	Calculation of cash flow per year (t=0 to t=11)
	
	EBIT
	$40,266,000
	Less: tax@35%
	$14,093,100
	Net Income
	$26,172,900
	Add: Depreciation
	$18,641,667
	Cash flow
	$44,814,567
	
	
	After tax cash flow due to sales of Equipment in t = 12
	$7,270,250
	
	
	Cash flow in 12th year (t=12)
	$52,084,817
Once, the cash flows are projected for the entire duration of projects, capital budgeting tools are used to assess its financial feasibility. Net Present Value (NPV), Internal Rate of Return (IRR), Profitability Index (PI), Payback Period, Discounted Payback Period are some of the major tools for assessment.

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The company that is chosen for this project is ADIDAS and you must use the company most recent 10-K report and in a power point form. I have uploaded an example of what is required You have recently...

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