case 13 The Lazy Mower - Case Analysis of The Lazy Mower...

This preview shows page 1 - 7 out of 13 pages.

We have textbook solutions for you!
The document you are viewing contains questions related to this textbook.
International Financial Management
The document you are viewing contains questions related to this textbook.
Chapter 16 / Exercise 24
International Financial Management
Madura
Expert Verified
Case Analysis of The Lazy Mower! Prepared by Quanyi Liu for Professor C.E.Reese in partial fulfillment of the requirements for FIN 751-Financial Management School of Business/Graduate Studies St. Thomas University Miami Gardens, FLa. Term A6/Fall, 2015 September 26, 2015
We have textbook solutions for you!
The document you are viewing contains questions related to this textbook.
International Financial Management
The document you are viewing contains questions related to this textbook.
Chapter 16 / Exercise 24
International Financial Management
Madura
Expert Verified
Contents Issues ................................................................................................................................................ 3 Facts ............................................................................................................................................. 4 Analysis ........................................................................................................................................ 4 NPV .............................................................................................................................................. 7 IRR ........................................................................................................................................... 7 Conclusion ................................................................................................................................. 12 References .................................................................................................................................. 12
Issues
1.Prepare a Pro Forma Statement showing the annual cash flows resulting from the Lazy Mower project. 2.Use a scenario analysis to show how the cash flows would change if the sales forecasts were 15% worse (Pessimistic) and 15% better (Optimistic) than the stated forecast (base). 3. Realizing that the CIC will demand some kind of sensitivity analyses, how should Dan and Ron prepare their report? Which variables or inputs are obvious ones that need to be analyzed using multiple values? Explain by performing suitable calculations. 4. How should the annual interest expenses of $400,000 be treated? Explain. 5. Using the base case estimates calculate the cash, accounting, and financial breakeven of the Lazy Mower project. Interpret each one. 6. Let's say that the company had spent $500,000 in developing the prototype of the Lazy Mower. How should Dan and Ron treat this item in their report? Please explain. 7. Calculate the IRR of the project. Based on your calculations what would you recommend? Why? 8. How sensitive is the Net Present Value of the project to the cost of capital? 9. Calculate the operating leverage entailed by this project. What does it indicate? 10. What other types of contingency planning should Dan and Ron include to make the report comprehensive? Please explain the relevance of each suggestion.
Facts The design team at Creative Products Company had unveiled a fully-tested, proto-type of their latest innovation, the remote-controlled lawn mower, nick-named the 'Lazy Mower'. Before being given the 'go ahead' to go into full-scale production of the Lazy Mower, the team had to

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture