Submitted by: Submitted by srettberg
Views: 429
Words: 3598
Pages: 15
Category: Business and Industry
Date Submitted: 04/08/2011 10:38 AM
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By:
Shane R. Rettberg
Table of Contents
INTRODUCTION 3
PROFORMA STATEMENT 3 WORST & BEST CASE SCENARIOS 3
SENSITIVIY ANALYSIS 4
INTEREST EXPENSE 14
CASH BREAKEVEN 15
ACCOUTNING BREAKEVEN 16
FINANCIAL BREAKEVEN 17
INVESTMENT 18
INTERNAL RATE OF RETURN 18
NPV SENSITIVITY 19
OPERATING LEVERAGE 20
CONTINGENCY PLANNING 21
APPENDIX A 22-23
APPENDIX B 24-25
APPENDIX C 26-27
APPENDIX D 28-29
APPENDIX E 30
APPENDIX F 30
APPENDIX G 31
APPENDIX H 32
APPENDIX I 33
Introduction
We were asked to analyze whether or not the Football Mower is a viable project to invest in based upon a given set of parameters. We were also required to determine at what level the Football Mower would become the most profitable or to determine if it was profitable at all.
We started by creating a standard proforma statement based upon the base assumptions that were given. We also calculated the proforma statement using an optimistic outlook with increased sales of 15% above the normal, and a pessimistic one using 15% below the normal.
Proforma Statement
In preparing our normal proforma statement we calculated the estimated cash flows for the next 10 years based upon the unit sales and price per unit in the assumptions. Our calculation determined that based upon the circumstances and costs given, the Football Mower project has a negative net present value of $11,061,250 with an Internal Rate of Return of 5.96% (Appendix A).
The problem is that with the cost of capital at 18% and the variable costs at $400 per unit, the project is not feasible. Essentially it...