Essay About 601,740Incremental Advertising Expense And 2,000,000Net Working Capital

The Procter and Gamble Company: Investment in Crest Whitestrips Advance Seal – Case Study – Levince Choong
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The Procter and Gamble Company: Investment in Crest Whitestrips Advance Seal
Case 23: The Procter and Gamble Company: Investment in Crest Whitestrips Advance SealQuestion: To calculate the NPV of the new product.A. Establishing a Base CasePrice (per unit) = $22Cost (per unit) = $12Gross profit (per unit)= $10Annual forecast units sold= 2,000,000Net working capital (incremental average at 9%) = $601,740Incremental advertising expense (for new product) =$2,000,000Incremental selling, general & administrative expense = $1,000,000Capital expenditures (R&D) = $4,000,000 (depreciable asset)Development expenses (one time) = $1,500,000 (to get the project going)Depreciation (reporting method) = Straight-line schedule Salvage value = 0Project Life = 4 yearsDiscount rate = 8%Tax Rate = 40%Initial outlay:    Capital expenditures (R&D)                 $4,000,000 + Development expenses (one time)        $1,500,000 + Net working capital                        $   601,740 Total initial outlay                                $6,101,740Annual Cash flow for YR 1 to 4: Increased Revenue (2mil x $10)        $20,000,000                  –  Incremental advertising expense         ($ 2,000,000)-  Incremental selling, general &    administrative expense                         ($ 1,000,000)                 –   Depreciation                                ($ 1,000,000)                      EBIT                                        $16,000,000                  –  Taxes (40%) _                                ($ 6,400,000)                      EAT                                                         $  9,600,000                  +  Depreciation                                $  1,000,000

Annual Cash flow (Yr 1-4)                $10,600,000Terminal cash flow:    Total Salvage value                           $ 0   Total book value                          $ 0   Tax on capital                                  $ 0   Recapture of net working capital _        $601,740   Terminal cash flow                   _        $601,740Project NPV:CF0 = – $6,101,740CF1 = $10,600,000CF2 = $10,600,000CF3 = $10,600,000CF4 = $10,600,000 + $601,740        = $11,201,740i = 8%NPV = $29,449,101.37B. Drive Revenue (Strategy A)Price (per unit) = $21Cost (per unit) = $12Gross profit (per unit)= $9Annual forecast units sold= 3,250,000Net working capital (incremental average at 9%) = $601,740Incremental advertising expense (for new product in YR 1) =$3,500,000Incremental advertising expense (for new product after YR 1) =$2,000,000Incremental selling, general & administrative expense = $1,000,000Capital expenditures (R&D) = $4,000,000 (depreciable asset)Development expenses (one time) = $1,500,000 (to get the project going)Depreciation (reporting method) = Straight-line schedule Salvage value = 0Project Life = 4 yearsDiscount rate = 8%Tax Rate = 40%Initial outlay:    Capital expenditures (R&D)                 $4,000,000 + Development expenses (one time)        $1,500,000 + Net working capital                        $   601,740 Total initial outlay                                $6,101,740Annual Cash flow for YR 1 : Increased Revenue (3.25mil x $9)                $29,250,000                      –  Incremental advertising expense (Yr 1)        ($ 3,500,000)                      –  Incremental selling, general &

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(2017, 08). The Procter and Gamble Company: Investment in Crest Whitestrips Advance Seal. EssaysForStudent.com. Retrieved 08, 2017, from
“The Procter and Gamble Company: Investment in Crest Whitestrips Advance Seal” EssaysForStudent.com. 08 2017. 2017. 08 2017 < "The Procter and Gamble Company: Investment in Crest Whitestrips Advance Seal." EssaysForStudent.com. EssaysForStudent.com, 08 2017. Web. 08 2017. < "The Procter and Gamble Company: Investment in Crest Whitestrips Advance Seal." EssaysForStudent.com. 08, 2017. Accessed 08, 2017. Essay Preview By: Levince Choong Submitted: August 17, 2017 Essay Length: 3,109 Words / 13 Pages Paper type: Case Study Views: 1,560 Report this essay Tweet Related Essays Procter & Gamble Vs. Gillette Proctor & Gamble 1. What is Proctor & Gamble’s corporate strategy? Do the company’s businesses seem to be related or unrelated? Are Gillette’s businesses closely 1,632 Words  |  7 Pages Procter & Gamble Case Study BRIEF HISTORY Procter & Gamble was established in 1837 when candle maker William Procter and his brother-in-law, soap maker James Gamble merged their small businesses. 1,430 Words  |  6 Pages Procter & Gamble Case Study The Scoop Introducing some familiar names What would the world be like without Procter & Gamble? Simply put, there'd be no Ivory soap, no 3,073 Words  |  13 Pages Procter & Gamble Rely Tampons Case Study Abstract The purpose of this research paper is that to present the difficulties Procter & Gamble faced in the early 1980Ў¦s due to a correlation 2,227 Words  |  9 Pages Similar Topics Foxmeyer Drug Company Case Nakamura Lacquer Company Get Access to 89,000+ Essays and Term Papers Join 209,000+ Other Students High Quality Essays and Documents Sign up © 2008–2020 EssaysForStudent.comFree Essays, Book Reports, Term Papers and Research Papers Essays Sign up Sign in Contact us Site Map Privacy Policy Terms of Service Facebook Twitter