Should Marshall acquire Electro$-$Engineering $($EE$)?$ Even if the NPV is zero, should she still proceed? Given the close to zero leverage of EE$,$ consider using the unlevered cost of capital of $9\%.$ Also, consider a $3\mathrm{.}5\%$ perpetual growth rate. What is the effect if the growth rate is lower at$,$ say, $2\%.$

Projections given below:

Consolidated Income Statements of Electro$-$Engineering $($Actual and Projected$),2014-2021($Fiscal years ending December $31$; dollar figures in thousands$)$

$2014$A $2015$A $2016$A $2017$E $2018$E $2019$E $2020$E $2021$E

Net sales $2,944\mathrm{.}93,566\mathrm{.}34,072\mathrm{.}75,050\mathrm{.}25,933\mathrm{.}96,824\mathrm{.}07,642\mathrm{.}98,407\mathrm{.}2$

COGS $1,525\mathrm{.}01,811\mathrm{.}72,085\mathrm{.}22,474\mathrm{.}62,907\mathrm{.}63,343\mathrm{.}83,745\mathrm{.}04,119\mathrm{.}5$

Gross profit $1,420\mathrm{.}01,754\mathrm{.}61,987\mathrm{.}52,575\mathrm{.}63,026\mathrm{.}33,480\mathrm{.}33,897\mathrm{.}94,287\mathrm{.}7$

SG&A expense $814\mathrm{.}9930\mathrm{.}11,080\mathrm{.}91,205\mathrm{.}01,415\mathrm{.}81,628\mathrm{.}21,823\mathrm{.}62,006\mathrm{.}0$

R&D expense $153\mathrm{.}1178\mathrm{.}3219\mathrm{.}9262\mathrm{.}6308\mathrm{.}6354\mathrm{.}9397\mathrm{.}4437\mathrm{.}2$

Depreciation and amortization $142\mathrm{.}2196\mathrm{.}9206\mathrm{.}1259\mathrm{.}4304\mathrm{.}8350\mathrm{.}5392\mathrm{.}6431\mathrm{.}9$

Interest expense $18\mathrm{.}718\mathrm{.}718\mathrm{.}717\mathrm{.}15\mathrm{.}00\mathrm{.}60\mathrm{.}60\mathrm{.}6$

Pretax income $($loss$)291\mathrm{.}0430\mathrm{.}6461\mathrm{.}8831\mathrm{.}5992\mathrm{.}21,146\mathrm{.}11,283\mathrm{.}71,412\mathrm{.}1$

Income taxes $101\mathrm{.}8150\mathrm{.}7161\mathrm{.}6291\mathrm{.}0347\mathrm{.}3401\mathrm{.}1449\mathrm{.}3494\mathrm{.}2$

Net income $189\mathrm{.}1279\mathrm{.}9300\mathrm{.}2540\mathrm{.}5644\mathrm{.}9745\mathrm{.}0834\mathrm{.}4917\mathrm{.}9$

Number of common shares $($thousands$)1,1001,1001,1001,1001,1001,1001,1001,100$

Earnings per share $0\mathrm{.}170\mathrm{.}250\mathrm{.}270\mathrm{.}490\mathrm{.}590\mathrm{.}680\mathrm{.}760\mathrm{.}83$

Cash dividend per share $0\mathrm{.}00\mathrm{.}00\mathrm{.}00\mathrm{.}00\mathrm{.}00\mathrm{.}00\mathrm{.}00\mathrm{.}0$

Exhibit $6$B

Assumptions Used for Consolidated Income Statements

$2014$A $2015$A $2016$A $2017$E $2018$E $2019$E $2020$E $2021$E

Revenue growth $21\mathrm{.}1\%14\mathrm{.}2\%24\mathrm{.}0\%17\mathrm{.}5\%15\mathrm{.}0\%12\mathrm{.}0\%10\mathrm{.}0\%$

Items as a $\%$ of Revenue

COGS $51\mathrm{.}8\%50\mathrm{.}8\%51\mathrm{.}2\%49\mathrm{.}0\%49\mathrm{.}0\%49\mathrm{.}0\%49\mathrm{.}0\%49\mathrm{.}0\%$

SG&A expense $27\mathrm{.}7\%26\mathrm{.}1\%26\mathrm{.}5\%23\mathrm{.}9\%23\mathrm{.}9\%23\mathrm{.}9\%23\mathrm{.}9\%23\mathrm{.}9\%$

R&D expense $5\mathrm{.}2\%5\mathrm{.}0\%5\mathrm{.}4\%5\mathrm{.}2\%5\mathrm{.}2\%5\mathrm{.}2\%5\mathrm{.}2\%5\mathrm{.}2\%$

Tax rate $35\mathrm{.}0\%35\mathrm{.}0\%35\mathrm{.}0\%35\mathrm{.}0\%35\mathrm{.}0\%35\mathrm{.}0\%35\mathrm{.}0\%35\mathrm{.}0\%$