Case ID: 202017     Solution ID: 1689     Words: 1658 Price $ 75

Whirlpool Europe Case Solution

Case Solution

This case demonstrates a capital budgeting issue. Whirlpool Europe is assessing the possibility of having an investment venture in an enterprise resource planning (ERP) system that would reshape and transform the data flow within the firm. Students predict the cash flows from working capital, sales, and other developmentsin addition to the cost of the investment.

Excel Calculations

South Wave, Central Wave, North Wave

Income Statement for South Wave ( $000)

Forecast Without the ERP System

Impact of ERP Systems

Forecast With the ERP System

Calculation of Additional Units

Inventory Savings


All Wave Combined

Forecast Without the ERP System

Forecast With the ERP System

Incremental Pre tax Cash flows from ERP System


Capex and Dep

Capital Expenditure and Depreciation ( $000)

Incremental Operating Expenses

Other Savings


FCF and NPV Analysis

Free Cash Flows and NPV Analysis


Questions Covered

What is the business case for Whirlpool Europe undertaking this possible investment in the ERP system?

What are the sources of potential benefits of the system for Whirlpool?  Should they have the same degree of confidence in each of sources?

Why do you think they decided to start the system in with the West Wave first?

What the sources and timing of costs they expect to incur with the implementation of the system?   

Assume that the proposed system will be in use though 2007.  Given the cost of capital and tax rate in the case, what is the NPV of this system? 

If we relax the assumption that the system would be used though 2007, what cash flows should be included beyond this point?

Would you recommend that they go ahead with this capital investment?  Do you have any major concerns?  If so, how might these have been addressed in your analysis?