The CFO of Flash Memory, Inc., is arranging the organization's future financing and contributing objectives for the coming three years. Streak Memory is an average estimated firm that has created aptitude in the development and generation of Solid-state drives (SSDs) and memory units for the PC and computerized ventures. The association positively reserves the innovative work (R&D) of inventive merchandise to keep up it's a distinctive competitive advantage and edge in the business over other key players. Higher requirements for the working capital have constrained the CFO to contemplate different methods for further financing.
Moreover, he should likewise consider speculation in a beginner product offering that can turn very worthwhile. Undergraduates/graduates will be required to build monetary expectations and estimates, process the weighted normal expense of capital (WACC), rough money streams, and evaluate financing choices accessible. This case is explicitly proposed to be given a last test of the year in an MBA-level corporate money course. Key ideas and learning include Capital Budgeting, Cash Flows, Financial Forecasting, Long Term Financing, Net Present Value (NPV), and Weighted Average Cost of Capital (WACC). Download understood Harvard contextual analysis: Flash Memory, Inc investigation in Word Doc, Ppt pdf record containing solution with excel support. Download Flash Memory, Inc. case analysis and solution in Word Doc, Ppt or PDF record with excel support.
New project NPV
Cost of Equity
Financing for New Project
Q1: Assuming the company does not invest in the new product line, prepare forecasted income statements and balance sheets at year-end 2010, 2011, and 2012. Based on these forecasts, estimate Flash's required external financing: in this case all required external financing takes the form of additional notes payable from its commercial bank, for the same period.
Q2: Assume that firm will issue equity if it decides to go ahead with the new project:
a: Construct a table showing all the project cash flows from initial outlay to termination.
b: Calculate the NPV, IRR and Payback period for the project.
c: Should the company accept or reject this investment opportunity?
Q3: How would this decision change if the executive team decided to finance the project with bank loans?