Solution
Sugandh answered on
Mar 13 2021
Input
Full Production Common Assumptions
T +1 T+2 T+3 T+4 T+5 T+6 T+7 Market Testing $125,000
1997 1998 1999 2000 2001 2002 2003 Probability of Success 75%
Probability of Failure 25%
Intial Investment $800,000 Cost of Capital/Discount Rate 15%
Sales Price $28.00 $28.00 $28.00 $28.00 $28.00 $28.00 Tax Rate 40%
Unit Sales 70,000 80,000 110,000 110,000 110,000 110,000 Terminal Value 30%
Adjusted Unit Sales 70,000 80,000 110,000 110,000 110,000 110,000
COGS (% of Sales) 64% 64% 64% 64% 64% 64%
Administrative $156,800 $179,200 $246,400 $246,400 $246,400 $246,400 NWC Assumptions
Marketing $137,200 $112,000 $77,000 $77,000 $77,000 $77,000 Old NWC $49,000
Misc. $70,600 $78,400 $80,100 $80,100 $80,100 $80,100 ACP 35.9
Inventory (% of Sales) 15%
Limited Production Accurals (% of Sales) 2.2%
T +1 T+2 T+3 T+4 T+5 T+6 T+7 Purchases (% of COGS) 80%
1997 1998 1999 2000 2001 2002 2003 Average Payment Period 30
Days in year (NWC) 360
Intial Investment $390,000
Sales Price $28.00 $28.00 $28.00 $28.00 $28.00 $28.00 Scenario Analysis Assumtions
Unit Sales 20,000 25,000 30,000 30,000 30,000 30,000 Sales Price $0.00
Adjusted Unit Sales 20,000 25,000 30,000 30,000 30,000 30,000 Additional Fixed Costs (Ball Department) $0.00
COGS (% of Sales) 67% 67% 67% 67% 67% 67% Unit Sales (New Cleat) 100%
Administrative $84,000 $105,000 $100,800 $100,800 $100,800 $100,800 Unit Sales (Old Cleat) 100%
Marketing $30,000 $30,000 $25,000 $25,000 $25,000 $25,000 COGS (FP) 64%
Misc. $39,200 $49,000 $50,400 $50,400 $50,400 $50,400 COGS (LP) 67%
COGS (Old Cleat) 70%
Old Cleat
T + 1 T + 2 T + 3 T + 4 T + 5 T + 6 T + 7
1997 1998 1999 2000 2001 2002 2003
Sales Price $20.00 $20.00 $20.00 $20.00 $20.00 $20.00
Unit Sales 13,000 13,000 13,000 13,000 13,000 13,000
Adjusted Unit Sales 13,000 13,000 13,000 13,000 13,000 13,000
COGS (% of Sales) 70% 70% 70% 70% 70% 70%
Administrative $30,000 $30,000 $30,000 $30,000 $30,000 $30,000
Marketing $5,000 $5,000 $5,000 $5,000 $5,000 $5,000
Misc. $15,000 $15,000 $15,000 $15,000 $15,000 $15,000
OCF (New Cleat)
Full...