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Guillermo Updateddata

The document contains setup information, income statements, balance sheets, and cash flow statements for a manufacturing company under its current operations and two alternative scenarios: Hi-Tech and Broker. 1) Under the Hi-Tech scenario, production capacity and technology would be significantly upgraded, increasing unit production by 50% and labor rates. This would boost net income but also increase overhead costs such as salaries, utilities and depreciation. 2) The Broker scenario involves outsourcing mid-grade production, eliminating direct costs and labor for those units but increasing the broker cost per unit. This lowers overhead and improves net income compared to current operations. 3) Both scenarios issue additional stock to fund capital expenditures, increasing

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72 views6 pages

Guillermo Updateddata

The document contains setup information, income statements, balance sheets, and cash flow statements for a manufacturing company under its current operations and two alternative scenarios: Hi-Tech and Broker. 1) Under the Hi-Tech scenario, production capacity and technology would be significantly upgraded, increasing unit production by 50% and labor rates. This would boost net income but also increase overhead costs such as salaries, utilities and depreciation. 2) The Broker scenario involves outsourcing mid-grade production, eliminating direct costs and labor for those units but increasing the broker cost per unit. This lowers overhead and improves net income compared to current operations. 3) Both scenarios issue additional stock to fund capital expenditures, increasing

Uploaded by

Gabi
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as XLS, PDF, TXT or read online on Scribd
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Setup Information

<Insert Facilitator's Name> 0.06


Peso? (1=Yes) 0 1.00 10.814 Mexican Pesos = 1.000 US Dollars

Income Information-Current Standards

Current Hi-Tech Broker


Production Current Production = Sales Forecast
Mid-Grade 2,532.00 3,798.00 3,798.00 Production can be increased by 50% and the broker also anticipates that same level
High-End 506.00 759.00 759.00 Production can be increased by 50%

Direct Materials ($)/Unit


Mid-Grade $ 140.00 $ 140.00 $ - There are no material costs for brokered units
High-End $ 250.00 $ 250.00 $ 250.00

Direct Labor ($/HR)/Unit $ 15.00 $ 40.00 $ 40.00 The labor rate is increased due to the technical skill level of operators

Labor Time (Hrs)/Unit


Mid-Grade $ 20.00 $ 4.00 $ - There are no labor times for brokered units and production times are 20% of original times
High-End $ 30.00 $ 4.00 $ 4.00 Production times are now equal to the mid-grade level

Direct Cost/Unit
Mid-Grade $ 440.00 $ 300.00 $ 360.00 The Broker cost for Mid-Grade is based on net FOB destination including shipping/tariffs
High-End $ 700.00 $ 410.00 $ 410.00

Price/Unit
Mid-Grade $ 509.00 $ 459.00 $ 459.00 Prices are reduced by 10% because supply is increased
High-End $ 879.00 $ 789.00 $ 789.00 Prices are reduced by 10% because supply is increased

Plant Overhead/Yr
Salaries $ 50,000.00 $ 95,000.00 $ 95,000.00 Need to add a 45,000 a year maintenance position for the equipment
Utilities $ 9,000.00 $ 27,000.00 $ 4,497.04 Utilities are expected to be 3 x's current at full production (150% above current levels) based on units produced
Benefits $ 103,730.00 $ 82,412.00 $ 21,644.00 Benefits are 10% of all wages (including direct labor)
Insurance $ 3,000.00 $ 15,000.00 $ 15,000.00 Insurance will increase by 12,000 with the addition of the equipment and building expansion
Property Taxes $ 975.00 $ 3,900.00 $ 3,900.00 Property taxes are 6.5%, assessment is 1% of original value, and that is on all plant/equipment
Depreciation $ 50,000.00 $ 466,666.67 $ 466,666.67 Buildings are at 30 years and Equipment is at 10 years, straight line
Supplies $ 6,000.00 $ 6,000.00 $ 6,000.00 Supply expense is miscellaneous and does not vary

Net Margin $ 265,282.00 $ 891,543.00 $ 663,663.00


Less Plant Overhead $ 222,705.00 $ 695,978.67 $ 612,707.70
Net Income Before Taxes $ 42,577.00 $ 195,564.33 $ 50,955.30
Less Income Tax Expense (42%) $ 17,882.34 $ 82,137.02 $ 21,401.22
Net Income After Taxes $ 24,694.66 $ 113,427.31 $ 29,554.07
Balance Sheets
Current Hi-Tech
12/31/08 12/31/09 12/31/09

Cash $ 120,872.00 $ 168,492.00 $ 693,236.26


Accounts Receivable $ 212,361.35 $ 216,695.25 $ 292,766.63
Inventory $ 118,685.97 $ 119,571.47 $ 118,034.00
Pre-paid Insurance $ 1,250.00 $ 1,500.00 $ 7,500.00
TOTAL CURRENT ASSETS $ 453,169.31 $ 506,258.72 $ 1,111,536.88

Buildings $ 1,500,000.00 $ 1,500,000.00 $ 2,000,000.00


Less: Accumulated Depreciation $ (600,000.00) $ (650,000.00) $ (666,666.67)
Equipment $ 50,000.00 $ 50,000.00 $ 4,050,000.00
Less: Accumulated Depreciation $ (50,000.00) $ (50,000.00) $ (450,000.00)
TOTAL ASSETS $ 1,353,169.31 $ 1,356,258.72 $ 6,044,870.22

Accounts Payable $ 79,916.68 $ 82,388.33 $ 126,895.00


Income Taxes Payable $ 16,988.22 $ 17,882.34 $ 82,137.02
Wages Payable $ 41,059.79 $ 43,220.83 $ 34,338.33
Current Portion of Notes Payable $ 27,132.06 $ 29,238.40 $ 29,238.40
TOTAL CURRENT LIABILITIES $ 165,096.76 $ 172,729.90 $ 272,608.75

Mortgage Note Payable $ 965,866.63 $ 936,628.23 $ 936,628.23


TOTAL LIABILITIES $ 1,130,963.39 $ 1,109,358.13 $ 1,209,236.98

Common Stock $ 10,000.00 $ 10,000.00 $ 4,510,000.00


Retained Earnings $ 212,205.93 $ 236,900.59 $ 325,633.24
TOTAL EQUITY $ 222,205.93 $ 246,900.59 $ 4,835,633.24
TOTAL LIABILITIES & EQUITY $ 1,353,169.31 $ 1,356,258.72 $ 6,044,870.22

Cash Flow Statements


Current Hi-Tech
12/31/2017 12/31/2017
OPERATING ACTIVITIES
Net Income $ 24,694.66 $ 113,427.31
Depreciation Expense $ 50,000.00 $ 466,666.67
Decrease (Increase) in Current Assets $ (5,469.41) $ (86,003.31)
Increase (Decrease) in Current Liabilities $ 7,633.14 $ 107,511.99
Cash flow from Operating Activities $ 76,858.40 $ 601,602.65

INVESTING ACTIVITIES
Capital Expenditures $ - $ (4,500,000.00)
Cash flow from Investing Activities $ - $ (4,500,000.00)

FINANCING ACTIVITIES
Issuance of stock $ - $ 4,500,000.00
Increase (Decrease) of Notes Payable $ (29,238.40) $ (29,238.40)
Cash flow from Financing Activities $ (29,238.40) $ 4,470,761.60

Total Cash Flow $ 47,620.00 $ 572,364.26


Beginning Cash Flow $ 120,872.00 $ 120,872.00
Ending Cash $ 168,492.00 $ 693,236.26

WACC FOR 12/31/08 5.61% ? ?


(use as discount rate for NPV calculations)

NPV ? ?
Broker
12/31/09

$ 414,391.67
$ 292,766.63 DSO = 45 days
$ 136,454.30 The plant completes all work-in-process before year end inventory
$ 7,500.00 1/2 a year pre-paid
$ 851,112.60

$ 2,000,000.00 Hi-Tech & Broker reflect $500,000 increase in capital expenditure


$ (666,666.67) Current Building has been in use for 13 years
$ 4,050,000.00 Hi-Tech & Broker reflect $4M increase in capital expenditure
$ (450,000.00) Current equipment fully depreciated several years ago
$ 5,784,445.93

$ 36,399.75 A/P represents 2 months of purchases & 1 month of bills & Prop Tax
$ 21,401.22 All timing issues wash out (for simplicity)
$ 9,018.33 Wages are two weeks
$ 29,238.40
$ 96,057.71

$ 936,628.23 Building was financed Jan 1, 12 years ago at 7.5% and 80% LTV
$ 1,032,685.94

$ 4,510,000.00 Hi-Tech and Broker reflect issuance of additional 4.5M shares


$ 241,760.00
$ 4,751,760.00
$ 5,784,445.93

Broker
12/31/2017

$ 29,554.07
$ 466,666.67
$ (104,423.61)
$ (69,039.05)
$ 322,758.07

$ (4,500,000.00)
$ (4,500,000.00)

$ 4,500,000.00
$ (29,238.40)
$ 4,470,761.60

$ 293,519.67
$ 120,872.00
$ 414,391.67

?
Sales growth has slowed to 1%
Inflation is running at 3%

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