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    Case 1 - Taylor

    Uploaded by

    Edwin Espiritu
    The document outlines 3 different strategies - accounting, marketing, and manufacturing - with their investment costs, cash flows, and net present values over a 3 year period. The accounting strategy has a positive NPV but a declining return on investment each year. The marketing strategy has an increasing NPV each year but remains below the initial investment after 3 years. The manufacturing strategy has the highest return, with no costs or cash flows for the first 2 years and a high return in year 3, resulting in a positive but low NPV.

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    Case 1 - Taylor

    Uploaded by

    Edwin Espiritu
    117 views5 pages
    The document outlines 3 different strategies - accounting, marketing, and manufacturing - with their investment costs, cash flows, and net present values over a 3 year period. The accounting strategy has a positive NPV but a declining return on investment each year. The marketing strategy has an increasing NPV each year but remains below the initial investment after 3 years. The manufacturing strategy has the highest return, with no costs or cash flows for the first 2 years and a high return in year 3, resulting in a positive but low NPV.

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    Case 1_ Taylor

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    The document outlines 3 different strategies - accounting, marketing, and manufacturing - with their investment costs, cash flows, and net present values over a 3 year period. The accounting strategy has a positive NPV but a declining return on investment each year. The marketing strategy has an increasing NPV each year but remains below the initial investment after 3 years. The manufacturing strategy has the highest return, with no costs or cash flows for the first 2 years and a high return in year 3, resulting in a positive but low NPV.

    Copyright:

    © All Rights Reserved
    Download as XLSX, PDF, TXT or read online from Scribd
    Download as xlsx, pdf, or txt
    117 views5 pages

    Case 1 - Taylor

    Uploaded by

    Edwin Espiritu
    The document outlines 3 different strategies - accounting, marketing, and manufacturing - with their investment costs, cash flows, and net present values over a 3 year period. The accounting strategy has a positive NPV but a declining return on investment each year. The marketing strategy has an increasing NPV each year but remains below the initial investment after 3 years. The manufacturing strategy has the highest return, with no costs or cash flows for the first 2 years and a high return in year 3, resulting in a positive but low NPV.

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    © All Rights Reserved
    Download as XLSX, PDF, TXT or read online from Scribd
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    3 Year Planning Y0 Y1 Y2 Y3 Total

    Accounting Strategy 20% 25% 25% 25%

    Investment (100,000.00) (100,000.00)


    NVRVC -30,000 -30,000 -30,000 (90,000.00)
    Total Outflow (100,000.00) (30,000.00) (30,000.00) (30,000.00) (190,000.00)

    Inflow 125,000.00 125,000.00 125,000.00 375,000.00

    Net Cash Flow (100,000.00) 95,000.00 95,000.00 95,000.00 185,000.00


    Discount Rate 1.00 0.91 0.83 0.75
    NPV (100,000.00) 86,363.64 78,512.40 71,374.91 136,250.94
    Less investment. Although there is a declining return on investment in 3
    Notes: years, strategy maintains positive NPV.
    Disadvantage
    Addresses short term goal only, possible for a firm to perform very
    satisfactory in a short run, neglecting new product, management and
    training development at the expense of long term profitability.

    3 Year Planning Y0 Y1 Y2 Y3 Total


    Marketing Strategy 20% 30% 30% 30%

    Investment (200,000.00) (165,000.00) (50,000.00) (30,000.00) (445,000.00)


    NVRVC -30,000 -30,000 -30,000 (90,000.00)
    Total Outflow (200,000.00) (195,000.00) (80,000.00) (60,000.00) (535,000.00)

    Inflow 260,000.00 260,000.00 260,000.00 780,000.00

    Net Cash Flow (200,000.00) 65,000.00 180,000.00 200,000.00 245,000.00


    Discount Rate 1 0.91 0.83 0.75
    NPV (200,000.00) 59,090.91 148,760.33 150,262.96 158,114.20
    NPV is increasing each year although at then end of 3 years NPV is still
    below the initial investment. Marketing at this stage is reaching
    prospective consumers and turning them into customers of
    Notes: products/services.

    3 Year Planning Y0 Y1 Y2 Y3 Total


    Manufacturing Strategy 20% 0% 0% 50%

    Investment (500,000.00) (500,000.00)


    NVRVC -30,000 (30,000.00)
    Total Outflow (500,000.00) - - (30,000.00) (530,000.00)

    Inflow 750,000.00 750,000.00

    Net Cash Flow (500,000.00) - - 720,000.00 220,000.00


    Discount Rate 1 0.91 0.83 0.75
    NPV (500,000.00) - - 540,946.66 40,946.66
    Notes: High Return at Y3, for long term profitability

    A flexible manufacturing system (FMS) is a production method that is designed to easily adapt to
    changes in the type and quantity of the product being manufactured. Machines and computerized
    systems can be configured to manufacture a variety of parts and handle changing levels of
    production.

    Cost benefit analysis provides a basis of comparing the total expected cost for each option against
    the total expected benefits, to see whether the benefits outweighs the costs and by how much.
    Unit
    Sales 10,000
    Less Volume related variable cost 5,000
    Contribution Margin 5,000
    Less Non-Volume related variable cost 3,000
    Cash Earnings before interest and taxes (EBIT) 2,000

    50,000.00

    (a)

    (c)

    (c)

    (b)

    (c)
    (d)
    Per Unit $ Total $
    100 1,000,000.00
    100 500,000.00
    0 500,000.00
    100 300,000.00
    100 200,000.00

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