Project #26119 - NPV Analysis

Net Present Value (NPV) Analysis for hypothetical make/buy decision.

 

Need to determine two benchmarks, against which I'd assess supplier quotes.

1# (First Benchmark# Need to determine the NPV at which the company is indifferent to making or buying #where the costs are the same, I think.)

Need to come up with a unit price based on the Unint Production Cost Data provided, then use the ten-year salse forecast to determine an annual aggregate production cost.  I need to then calc the NPV of these annual costs, using a 10% discount rate.

I have NPV tables available from my class.

Determiing annual production cost for each product will require me to allocate overhead to production costs.  Overhead can be based on labor cost, the sum of unit labor and material or per-unit.  I can choose.

2) #Second Benchmark)  The NPV at which the company will realize a 10% reduction in costs.  This requiers me to reduce the projected unit price by 10% each year and then follow the same steps to develop NPV.

Other tips exist, and the entire assignment can be forwarded, with NPV tables, and the fictitious figures provided us by our instructor.

I have been greenlighted by my instructor to enlist help, as long as when we are done, I understand how this operates.

I will also need to give a brief verbal summary of how the answers in the Excel spreadsheet were developed.

If you know how to do this, it will be about an hour's work, is my guess.

 

Subject Business
Due By (Pacific Time) 03/29/2014 06:00 pm
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