The alternatives of this case revolve around printed circuit boards. The company Stryker Corporation has an instruments division which needs to assess the alternatives of in-house manufacturing or contracting the manufacturing to a third-party. The business faces this decision because of the challenges faced because of the existing suppliers of the company. The quantitative analysis of the situation includes the capital budgeting, the net present value (NPV), the payback period of the investment, and the internal rate of return (IRR) that the company can get out of these alternatives.
Projections for Net Earnings from Project
Projected Accounts Payable
FREE CASH FLOW
Incremental Cash Flow
Cash Flow with Initial Investment
Amount Left to be recovered
1. State the business case for option #3: the PCB in-sourcing proposal.
2. Use the projections provided in the case to compute the incremental cash flows associated with option #Â 3, the PCB in-sourcing project.
3. Use the estimated incremental cash flows to compute the NPV, IRR, and payback period for the project.
4. Based on your analysis, would you recommend that Stryker Instruments fund this project?