You make the following assumptions about BHP’s 2022 income:
- BHP’s 2022 revenues will grow by the CAGR (compound annual growth rate)
between 2019 and 2021.
- BHP’s 2022 EBIT ratio (EBIT/revenue) will be the average EBIT ratio between 2019 and
2021.
- BHP’s 2022 tax expense rate (tax expense/profit before tax) will be the average tax
expense rate between 2019 and 2022.
Assume that items in the consolidated statement of comprehensive income are
unrelated to future income projections. What is your estimate of BHP’s 2022 after-tax
EBIT?

Question 2
You make the following assumptions about BHP’s 2022’s depreciation and capital
expenditures:
- BHP’s PP&E at the end of 2021 will be depreciated over the next 10 years to zero (no
salvage value) using the straight-line method.
- BHP’s 2022 capital expenditures will be made at the start of the year and will be 10%
of BHP’s 2022 projected sales. BHP’s capital expenditures from 2022 will be
depreciated over the next 12 years to zero using the straight-line method.
- No other considerations affect depreciation.
What is your estimate of BHP’s 2022 depreciation and capital expenditures?

Answer rating: 100% (QA)

Question 1 Assuming that BHPs 2022 income will grow at the same compound annual growth rate as betwe... View the full answer