Scenario: The Sparklin Automotive Company (SAC) has been in business since 1930. It began business in the United States supplying spark plugs to automotive manufacturers (OEM, the original equipment...

REPORT ON HIGH QUALITY SPARK PLUG

FOR INTRODUCTION OUTSIDE USA

By …………………….

OBJECTIVE
This report has been prepared to highlight the Financial Information for
introduction of high quality spark plug, Outside USA.
BACK GROUND
The company has introduced a new High quality spark plug. This has been
introduced in USA, and has been accepted by customers with open arms.
Now it is the time for us to introduce this spark plug OUTSIDE USA.
PROJECT COST
The project will require $12,000 million investment.
This investment will be financed by
Bank Loan $5000 million at 10% interest
Debt $5000 million at11 % interest
Issue of Common Stock $200 million at $5 EPS
The cost of Capital will be $1,500 million.
The funds so invested will give an annual cash flow of $2,000 million. This
will be used to pay back the loan amounts. The payback period is 6 years.
The cash flow has a positive cash flow of $1,225,000 million during the life
of this project.
PROJECT IMPLEMENTATION
The Project will be implemented as a separate entity. We will form a
separate unit, headed by President. President of this unit will be assisted by
- Vice president – Production
- Vice president - Marketing
- Vice President - Finance
- Vice President – HR
Below Vice president – a team of General Managers / Sr. Managers /
Managers / Executives will support the unit.
PROJECT FINANCIALS
The project has been fully analyzed as per the details given below. It is
estimated that the company will sell 1,000,000 units of spark plugs every
year at $25 each, according to the Annual Budget prepared.
 Master Budget – This is the summary of all the budgets prepared.
This indicates how the amounts will be earned and how the amounts
will be utilized. This also indicates the net wealth added from this
project.
 Sales Budget – This is starting point of budgeting. Sales budget is
ased on the expected sales each month. It gives the number of
sparkplugs expected to sell and their value in dollars. This is the first
udget in this process, and all following budgets are dependent on the
accuracy of this budget. Hence this budget has been prepared with
great care.
From this budget, we have also worked out the expected collections
for each month. This gives cash sales and collection from credit sales,
which is very important for cash budget.
 Production Budget – This budget indicates the number of
sparkplugs to be manufactured each month. This also shows the
inventory of finished product required at the end of each month. A
months ending inventory becomes beginning inventory for the next
month, hence production in number of units are...