817-808-9736 support 24/7
Home » essay examples » 2189334



CASESTUDY: Goodweek Four tires, Inc. Following extensive r and d, Goodweek Auto tires, Inc., has recently developed a brand new tire, the SuperTread, and must determine whether to make the investment necessary to produce and market the SuperTread.

The tire will be ideal for drivers doing a large amount of wet weather conditions and all-terrain driving furthermore to its normal freeway usage. Your research and development costs up to now total about $10 million. The SuperTread would be placed on the market beginning this year and Goodweek expects it to stay on the market for a total of four years.

Test marketing priced at $5 mil-lion shows that there exists a significant market for a SuperTread-type tire. Like a financial expert at Goodweek Tires, you are asked by your CFO, Mr. Adam Smith, to evaluate the SuperTread project and supply a suggestion on whether to go forward with the expense. You are informed that previous purchases of the SuperTread are sunk costs and later future funds flows should be thought about. Except for the first investment that can occur instantly, assume all cash flows will occur by year-end.

Goodweek must primarily invest $120 million in production gear to make the SuperTread. The equipment is definitely expected to include a seven-year useful existence. This equipment can be sold for $51, 428, 571at the end of four years. Goodweek intends to sell the SuperTread to two specific markets: 1 . The Original Tools Manufacturer (OEM) Market The OEM industry consists mostly of the large automobile companies (e. g., General Motors) who get tires for brand spanking new cars. In the OEM industry, the SuperTread is likely to sell for $36 per tire. The variable cost to create each car tire is $18. 2 .

The Replacement Marketplace The alternative market contains all auto tires purchased following your auto-mobile has left the factory. The foreign exchange market allows bigger margins and Goodweek wants to sell the SuperTread intended for $59 every tire there. Variable costs are the same as in the OEM market. Goodweek Tires hopes to raise prices at 1% above the inflation rate. Variable costs will also increase 1 percent above the inflation rate. In addition , the SuperTread project will certainly incur $25 mil-lion in marketing and standard administration costs the initially year (this figure is usually expected to boost at the inflation rate in the subsequent years).

Goodweek’s company tax price is 40 percent. Twelve-monthly inflation is expected to continue to be constant by 3. 25 %. The company works on the 15. on the lookout for percent discount rate to judge new product decisions. The tyre market Automotive aftermarket analysts expect automobile companies to produce 2 million new cars this season and creation to develop at installment payments on your 5 percent each year thereafter. Every single new car needs 4 tires (the spare auto tires are undersized and are in a different category). Goodweek Four tires expects the SuperTread for capturing 11 percent of the ORIGINAL EQUIPMENT MANUFACTURING market.

Sector analysts approximate that the alternative tire market size will probably be 14 , 000, 000 tires this coming year and that it will grow at 2 percent annually. Goodweek expects the SuperTread for capturing an almost eight per-cent market share. You decide to utilize the MACRS depreciation schedule (seven-year property class). You also plan to consider net working capital (NWC) requirements through this scenario. Instant initial seed money requirement is usually $11 , 000, 000, and thereafter the net working capital requirements will be 15 percent of revenue. What will always be the NPV, payback period, discounted payback period, AAR, IRR, and PI with this project?

< Prev post Next post >

Find Another Essay On Exploiting My Strengths and Strengthening My Weaknesses


Teenage years There are many issues in today’s culture that effect teenagers. Throughout high colleges students attitude are not steady and they are willingly to follow the crowd. These messages ...


Book Available, Life of Pi[1], Yann Martel proposes a large number of religious dissimilarities, and similarities from beliefs located around the globe. These questions ask specific things like, is it ...


Firms generally have sufficient investment chances available. Some of these expenditure opportunities happen to be valuable and more are not. The essence of successful financial management is usually identifying which ...


OWNERS’ BRAND PERCEPTION EXPLORATION PROPOSAL Prepared for Meteor Motorcycle Business Good Stuff! Dated: September seventh, ____ BUSINESS SUMMARY Presently, Meteor has to understand how the customers consider four brands relative ...


Nitric acidity is a very reactive oxidizing agent employed in making fertilizers, explosives, and rocket powers, and in a multitude of industrial metallurgical processes. Also, it is a component of ...


Will need to PSLE always be scrapped off? What is PSLE? The Primary College Leaving Evaluation (PSLE) is simply an evaluation taken by Principal 6 pupils before each goes onto ...


Financing string(61) ‘ Omega Technology share currently trades for \$11 per share\. ‘ Chapter 18 Capital Composition in a Excellent Market 14-1. Consider a project with free cash flows in ...


Not many celebrities that I just like. But she’s an celebrity that I admire very much for talent and her frame of mind. Her name is Angelina Jolie is an ...


MUSI200 twenty-seven January 2013 Baroque Versus Modern Put The American music regarded today features its root base in the audio practices present in Europe as well as the Middle East ...


Give a description of the function of one with the undermentioned home decorators: David Stirling, Grettle Foster, Ettore Sottsass, Rich Rogers, David Hicks, Philippe Starck. Advanced appeared inside the mid-thirtiess, ...
Category: Essay examples,

Topic: Capital requirements,

Words: 590

Published: 12.19.19

Views: 434

A+ Writing Tools
Get feedback on structure, grammar and clarity for any essay or paper
Start Writing
Payment discover visa paypalamerican-express How do we help? We have compiled for you lists of the best essay topics, as well as examples of written papers. Our service helps students of High School, University, College