This workout asks us to forecast the ending amount of property, plant and equipment (PP&E) You may wish to pause the recording and have a go on your own first So let's have a look what we've been given We've been given sales, accumulated depreciation in the prior year Depreciation expense (we're given a calculation for that), it's going to be 5% of the prior year net PP&E Maintenance capex is going to be 2% of sales Net amount of PP&E in the prior year, expansionary capex is just a figure 850 And the gross value of PP&E in the prior year 10,000 Well I can tell you right now, there are a couple of distractors that we don't need to be dealing with First of all that's the gross value of PP&E and the accumulated depreciation So we can ignore them already Because it's asking us to forecast PP&E going forward, I'm thinking BASE analysis I'm thinking B, A, S, E is going to be my starting point here So if we start off with beginning PP&E, that's what I need to be looking for first My beginning PP&E at the start of the year is going to be the same as my PP&E at the end of the prior year (the net amount of PP&E in the prior year) So that's going to be my starting point And I'll take the figure 8,000 I'm now going to ask, what makes that go up? What am I going to add onto it? That's the A of BASE analysis Well there are two items which could make it go up here We've got expansionary capex and we've got maintenance capex Both of which are going to add in value So add expansionary capex, that was the straight forward 850 I now need to add maintenance capex and we're told that's 2% of sales So if I take 2% of sales here (2% of 24,000), that comes as 480 So I've got the B and I've got the As of BASE analysis Next up I ask, is there anything that I should subtract from that beginning value? Now the subtract line is typically depreciation So depreciation expense is what I need to go looking for and I can see depreciation expense It's five% of the prior year net PP&E and that's our beginning PP&E So if we have a quick look, 5% of the 8,000 (that was my beginning PP&E or last year's ending net PP&E) Gives me a figure of 400 I now need to put it altogether to get to my ending PP&E and I'll take the beginning figure I'll add the capex, subtract the depreciation to get to the ending PP&E And that gives me a figure of 8,930 8,000 plus the 850, plus the 480, minus that 400 of depreciation expense And we have now forecasted ending PP&E into the future