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Base Case Financial Model

The document outlines the schedule and costs for a new product called the CI-700. It includes a development cost of $5 million, ramp-up cost of $2 million, and marketing/support cost of $1 million. The unit production cost is $400 and they plan to produce and sell 20,000 units at a price of $800 each. It then provides a cash flow analysis and net present value calculation for the project and analyzes the impact of changes to development costs, development time, sales volumes, and costs/prices.

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Abdul Khader
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424 views4 pages

Base Case Financial Model

The document outlines the schedule and costs for a new product called the CI-700. It includes a development cost of $5 million, ramp-up cost of $2 million, and marketing/support cost of $1 million. The unit production cost is $400 and they plan to produce and sell 20,000 units at a price of $800 each. It then provides a cash flow analysis and net present value calculation for the project and analyzes the impact of changes to development costs, development time, sales volumes, and costs/prices.

Uploaded by

Abdul Khader
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as XLSX, PDF, TXT or read online on Scribd
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CI-700 PROJECT SCHEDULE

DEVELOPMENT COST
5E+06
RAMP-UP COST
2E+06
MARKETING AND SUPPORT COST
1E+06
UNIT PRODUCTION COST
400
SALES AND PRODUCTION VOLUME
20000
UNIT PRICE
800

DATA

CI-700 PROJECT SCHEDULE


DEVELOPMENT
RAMP-UP
MARKETING AND SUPPORT
PRODUCTION AND SALES
RS IN '(000)
DEVELOPMENT COST
RAMP-UP COST
MARKETING AND SUPPORT COST
PRODUCTION VOLUME
UNIT PRODUCTION COST
PRODUCTION COST
SALES VOLUME
UNIT PRICE
SALES REVENUE

-1250 -1250 -1250 -1250


-1000 -1000
-250

PERIOD CASH FLOW


PV YEAR 1 r = 10%

-1250 -1250 -1250 -2250 -1250


-1220 -1190 -1161 -2038 -1105

PROJECT NPV

YEAR 1
2

PER YEAR
PER UNIT
UNITS PER YEAR
PER UNIT

YEAR 2
6

-250 -250 -250


5000 5000 5000
-0.4
-0.4
-0.4
-2000 -2000 -2000
5000 5000 5000
0.8
0.8
0.8
4000 4000 4000
1750
1509

1750
1472

1750
1436

$8,003
8003

SENSITIVITY ANALYSIS
1 CHANGES IN DEVELOPMENT COST

CI-700 PROJECT SCHEDULE


DEVELOPMENT
RAMP-UP
MARKETING AND SUPPORT
PRODUCTION AND SALES
RS IN '(000)
DEVELOPMENT COST
RAMP-UP COST
MARKETING AND SUPPORT COST
PRODUCTION VOLUME
UNIT PRODUCTION COST

20% INCREASE

YEAR 1
2

5 MILLION

-1500 -1500 -1500 -1500


-1000 -1000
-250

TO 6 MILLION

YEAR 2
6

-250
5000
-0.4

-250
5000
-0.4

-250
5000
-0.4

PRODUCTION COST
SALES VOLUME
UNIT PRICE
SALES REVENUE
PERIOD CASH FLOW
PV YEAR 1 r = 10%
PROJECT NPV

-2000 -2000 -2000


5000 5000 5000
0.8
0.8
0.8
4000 4000 4000
-1500 -1500 -1500 -2500 -1250
-1463 -1428 -1393 -2265 -1105
$7,062

DECREASE BY

1750
1509

1750
1472

1750
1436

0.882 or 11.8 percent

2 CHANGES IN PROJECT DEVELOPMENT


TIME

Impact of 25% increase in product development time 5 quarters and delay the start of the production ramp-u
sales.

3 SALES VOLUME

Impact of 25% increase and 25% decrease in sales.

4 PRODUCT COST OR SALES PRICE


5 DEVELOPMENT COST

TS PER YEAR

YEAR 3
10
11

12

13

YEAR 4
14
15

16

-250 -250 -250 -250 -250 -250 -250 -250


5000 5000 5000 5000 5000 5000 5000 5000
-0.4
-0.4
-0.4
-0.4
-0.4
-0.4
-0.4
-0.4
-2000 -2000 -2000 -2000 -2000 -2000 -2000 -2000
5000 5000 5000 5000 5000 5000 5000 5000
0.8
0.8
0.8
0.8
0.8
0.8
0.8
0.8
4000 4000 4000 4000 4000 4000 4000 4000
1750
1401

-250
5000
-0.4

1750
1367

1750
1334

YEAR 3
10
11

-250
5000
-0.4

-250
5000
-0.4

1750
1301

1750
1269

12

13

-250
5000
-0.4

-250
5000
-0.4

1750
1239

1750
1208

1750
1179

YEAR 4
14
15

16

-250
5000
-0.4

-250
5000
-0.4

-250
5000
-0.4

-2000 -2000 -2000 -2000 -2000 -2000 -2000 -2000


5000 5000 5000 5000 5000 5000 5000 5000
0.8
0.8
0.8
0.8
0.8
0.8
0.8
0.8
4000 4000 4000 4000 4000 4000 4000 4000
1750
1401

1750
1367

1750
1334

1750
1301

1750
1269

1750
1239

1750
1208

1750
1179

1.8 percent

duct development time - increase development time from 4 to


of the production ramp-up, marketing efforts and product

% decrease in sales.

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