You are a production coordinator for Soapex Corporation, a manufacturing company that manufactures bottles of liquid soap. Soapex has determined that they need to make

Competency

Critique organizational investments using forecasting scenarios.

Student Success Criteria

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Scenario

You are a production coordinator for Soapex Corporation, a manufacturing company that manufactures bottles of liquid soap. Soapex has determined that they need to make some strong investments to ramp up production and generate an increase in revenue. Currently, the equipment Soapex uses is over 20 years old, purchased when liquid soap first entered the retail market. While the equipment still works, the company incurs $100,000 annually in maintenance expenses because the equipment is old. Soapex presently produces 1 million cases of liquid soap per year. This soap sells for $3 per case.

Given the age of the equipment, you anticipate a decline in production of 50,000 cases in each of the next five years because of breakdowns in the equipment. You have been researching new production equipment and have found a new machine that will reduce annual operating costs to $48,000 per year and allow an increase in production over the 1 million cases presently being sold by sales and marketing. In conversations with sales and marketing, management believes they can increase sales by 1% per year for the next five years. The new machine will have a fully loaded cost of $370,000 and an expected useful life of 5 years with no salvage value. The old machine can be sold today as scrap for $5,000.

Instructions

Prepare a 6-10 slide PowerPoint presentation for management to demonstrate the following:

• Using the Net Cash Flow template, develop a schedule of projected cash flows using current equipment, including the reduction in future sales. Insert this information in your PowerPoint presentation.

Module 6 Net Cash flow Template.xlsx

• Using the Net Cash Flow template, develop a schedule of projected cash flows using discounted cash flows for the proposed new equipment. Insert this information in your PowerPoint presentation.
• In your PowerPoint presentation, analyze the projected cash flows and evaluate the feasibility of the proposed capital investment.
• Make a recommendation on the course of action the management of Soapex Corporation should take regarding the capital equipment used in this manufacturing process.

NOTE – Be sure the documents display proper grammar, spelling, punctuation, and sentence structure.

Assessment Requirements/Submission Requirement:

• 6-10 slide PowerPoint Presentation

A – 4 – Mastery

Schedule of projected cash flows using current equipment is both accurate and cogent.

A – 4 – Mastery

Schedule of discounted cash flows using current equipment is both accurate and cogent.

A – 4 – Mastery

Accurately and cogently evaluates feasibility of the proposed capital investment.

A – 4 – Mastery

Accurate and articulate recommendation.