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I Gde Nyoman Aditya Wibisana

29117424
YP 58 A
Chapter 3: Number 11

Development Cost $20,000,000.00


Pilot Testing $5,000,000.00
Debug $3,800,000.00
Ramp-up Cost $3,000,000.00
Advance Marketing $6,600,000.00
Marketing and Support $1,000,000.00 per year
Unit Production Cost Year 1 $655.00
Unit Production Cost Year 2 $545.00
Unit Price Year 1 $820.00
Unit Price Year 2 $650.00
Sales and Production Volume Year 1 250
Sales and Production Volume Year 2 150
Interest Rate 10%

This table explains about Patay2 Chip Product Estimates, and the next table will explain about
Patay2 Chip project timing from development until production and sales.

Year 1 Year 2 Year 3 Year 4


Patay2 Chip
1st Half 2nd Half 1st Half 2nd Half 1st Half 2nd Half 1st Half 2nd Half
Development
Pilot Testing
Debug
Ramp-up
Advance Marketing
Marketing and Support
Production and Sales

February 8th, 2018 1


a. What are the yearly cash flows and their present value (discounted at 10%) of this project? What is the net present value?
Year 1 Year 2 Year 3 Year 4
Patay2 Chip
1st Half 2nd Half 1st Half 2nd Half 1st Half 2nd Half 1st Half 2nd Half
Development
Pilot Testing
Debug
Ramp-up
Advance Marketing
Marketing and Support
Production and Sales

Year 1 Year 2 Year 3 Year 4


Patay2 Chip
1st Half 2nd Half 1st Half 2nd Half 1st Half 2nd Half 1st Half 2nd Half
Development -$5,000,000.00 -$5,000,000.00 -$5,000,000.00 -$5,000,000.00
Pilot Testing -$2,500,000.00 -$2,500,000.00
Debug -$1,900,000.00 -$1,900,000.00
Ramp-up -$3,000,000.00
Advance Marketing -$6,600,000.00
Marketing and Support -$500,000.00 -$500,000.00 -$500,000.00 -$500,000.00
Unit Production Cost -$655.00 -$655.00 -$545.00 -$545.00
Production Volume 125,000 125,000 75,000 75,000
Production Cost -$81,875,000.00 -$81,875,000.00 -$40,875,000.00 -$40,875,000.00
Sales Volume 125,000 125,000 75,000 75,000
Unit Price $820.00 820 650 650
Sales Revenue $102,500,000.00 $102,500,000.00 $48,750,000.00 $48,750,000.00
Period Cash Flow -$5,000,000.00 -$5,000,000.00 -$9,400,000.00 -$19,000,000.00 $20,125,000.00 $20,125,000.00 $7,375,000.00 $7,375,000.00
PV Year 1 (r = 5% per semester) -$4,761,904.76 -$4,535,147.39 -$8,120,073.43 -$15,631,347.02 $15,768,464.10 $15,017,584.86 $5,241,274.81 $4,991,690.29
Time 1 2 3 4 5 6 7 8
Project NPV $7,970,541.46

Based on the table, in the first 2 years the period cash flow is minus because Parot Corp. has not started sales and the value of project
NPV is $7.970.541,46 it means the project should be accepted as it will increase profit and therefore value of the company.

February 8th, 2018 2


b. Perot’s engineers have determined that spending $10 million more on development will allow them to add even more advance
features. Having a more advanced chip will allow them to price the chip $50 higher in both years. Is it worth the additional
investment?

Year 1 Year 2 Year 3 Year 4


Patay2 Chip
1st Half 2nd Half 1st Half 2nd Half 1st Half 2nd Half 1st Half 2nd Half
Development
Pilot Testing
Debug
Ramp-up
Advance Marketing
Marketing and Support
Production and Sales

Year 1 Year 2 Year 3 Year 4


Patay2 Chip
1st Half 2nd Half 1st Half 2nd Half 1st Half 2nd Half 1st Half 2nd Half
Development -$7,500,000.00 -$7,500,000.00 -$7,500,000.00 -$7,500,000.00
Pilot Testing -$2,500,000.00 -$2,500,000.00
Debug -$1,900,000.00 -$1,900,000.00
Ramp-up -$3,000,000.00
Advance Marketing -$6,600,000.00
Marketing and Support -$500,000.00 -$500,000.00 -$500,000.00 -$500,000.00
Unit Production Cost -$655.00 -$655.00 -$545.00 -$545.00
Production Volume 125,000 125,000 75,000 75,000
Production Cost -$81,875,000.00 -$81,875,000.00 -$40,875,000.00 -$40,875,000.00
Sales Volume 125,000 125,000 75,000 75,000
Unit Price $870.00 $870.00 $700.00 $700.00
Sales Revenue $108,750,000.00 $108,750,000.00 $52,500,000.00 $52,500,000.00
Period Cash Flow -$7,500,000.00 -$7,500,000.00 -$11,900,000.00 -$21,500,000.00 $26,375,000.00 $26,375,000.00 $11,125,000.00 $11,125,000.00
PV Year 1 (r = 5% per semester) -$7,142,857.14 -$6,802,721.09 -$10,279,667.42 -$17,688,103.21 $20,665,502.64 $19,681,431.09 $7,906,329.80 $7,529,837.90
Time 1 2 3 4 5 6 7 8
Project NPV $13,869,752.57

February 8th, 2018 3


Perot will be spending $2.500.000 more on development every semester, then the price will be increasing from $820 to $870 for
year 1 and $650 to $700 for year 2. So, the project NPV will be increasing too from $7.970.541,46 become $13.869.752,57 and
it means the plan should be accepted and it will increase profit.
c. If sales are only 200.000 the first year and 100.000 the second year, would Perot still do the project?

Year 1 Year 2 Year 3 Year 4


Patay2 Chip
1st Half 2nd Half 1st Half 2nd Half 1st Half 2nd Half 1st Half 2nd Half
Development
Pilot Testing
Debug
Ramp-up
Advance Marketing
Marketing and Support
Production and Sales

Year 1 Year 2 Year 3 Year 4


Patay2 Chip
1st Half 2nd Half 1st Half 2nd Half 1st Half 2nd Half 1st Half 2nd Half
Development -$7,500,000.00 -$7,500,000.00 -$7,500,000.00 -$7,500,000.00
Pilot Testing -$2,500,000.00 -$2,500,000.00
Debug -$1,900,000.00 -$1,900,000.00
Ramp-up -$3,000,000.00
Advance Marketing -$6,600,000.00
Marketing and Support -$500,000.00 -$500,000.00 -$500,000.00 -$500,000.00
Unit Production Cost -$655.00 -$655.00 -$545.00 -$545.00
Production Volume 125,000 125,000 75,000 75,000
Production Cost -$81,875,000.00 -$81,875,000.00 -$40,875,000.00 -$40,875,000.00
Sales Volume 100 100 50 50
Unit Price $870.00 $870.00 $700.00 $700.00
Sales Revenue $87,000.00 $87,000.00 $35,000.00 $35,000.00
Period Cash Flow -$7,500,000.00 -$7,500,000.00 -$11,900,000.00 -$21,500,000.00 -$82,288,000.00 -$82,288,000.00 -$41,340,000.00 -$41,340,000.00
PV Year 1 (r = 5% per semester) -$7,142,857.14 -$6,802,721.09 -$10,279,667.42 -$17,688,103.21 -$64,474,801.19 -$61,404,572.56 -$29,379,566.19 -$27,980,539.23
Time 1 2 3 4 5 6 7 8
Project NPV ($225,152,828.02)

February 8th, 2018 4


If Perot reduce sales from 250 become 200 at the first year and 150 become 100 it will reduce the NPV too become -
$225.152.828,02. So, Perot will not do the project.

February 8th, 2018 5


Chapter 3: Ikea Design and Pricing

1. What are IKEA’s competitive priorities?


IKEA's competitive priority is to create quality products with low prices. they are able to
achieve this by creating a cheap product without making customers feel that the goods are
cheap. The process of minimizing costs begins at the beginning of the formation of new
products and will be carried out continuously into the entire production process undertaken.
IKEA has the slogan "Low price with meaning". this requires a balance of three things: the
whole thing, the design, and the function.

2. Describe IKEA’s process for developing a new product

a. IKEA starts the process by picking how much the new product will cost. This will help to
determine materials used, design and even the colors that are going to be used.

b.The next step is to choose a manufacturer from their network of manufactures. This is done
by determining which manufacturer can most efficiently produce the new product.

c. Next they design the product, keeping in everything in mind from the production, packaging,
and even the shipping. Every inch of the product is looked over so that they are able to get
the most out of the manufacturing, shipping, and the storage of the new product.

d. Finally they ship it. IKEA has a vast amount of nice products that do need to be assembled
once purchased because they are committed not shipping by air. They even vacuum seal
certain items to get them as flat as possible for shipping.

3. What are additional features of the IKEA concept that contribute to creating exceptional value
for customer?
The way that the company ships their products is a major contributor. By shipping flat, they
ship only 65% full containers and by strategically placing their distribution centers near ports,
railways, and highways IKEA is able to ship with great efficiency. Getting the maximum
amount of products shipped out, at the right time to the right stores keeping their prices 20 the
30 percent lower than their competition is another contributing factor to the IKEA concept.

February 8th, 2018 6


4. What should be important criteria for selecting a site for an IKEA store?’
a. adequate land area
in building the IKEA building, it takes a large area of land to cover the storefront of two
floors with the show room and market-hall above and the warehouse below. In addition to
the IKEA store there is a restaurant that sells several types of Swedish food including typical
Swedish meatball, daycare facilities and information outposts for consulting design and
product selection
b. location and access to IKEA
IKEA reduces the cost of the products imposed on its consumers by reducing the variable
costs of its products. One of them is distribution cost. by positioning its outlets in the easy
transportation path of goods then IKEA can reduce distribution costs and supply of goods.
In addition, the location can also be easily reached by consumers although the distance may
be traveled further from other similar outlets. Compensation to the consumers in the form
of the concept of facilities "one stop shopping" owned by IKEA. quantity, size, and quality
of competition also need attention. and population trends in trading areas.

Chapter 4: Number 8

ACT A M (MOST B EXPECTED


DESINATION PREDECESSOR (MINIMUM) LIKELY) (MAXIMIUM TIME
A - 1 3 5 3
B - 1 2 3 2
C A 1 2 3 2
D A 2 3 4 3
E B 3 4 11 5
F C,D 3 4 5 4
G D,E 1 4 6 4
H F,G 2 4 5 4

February 8th, 2018 7


a. Draw the network
3 5

C (2)
0 3 6 10

5 7
A (3) F (4)
3 6

7 11 11 15
2 5 D (8)

H (4)
4 7

0 2 2 7 7 11
11 15

B (2) E (5) G (4)

0 2 2 7 7 11

b. What is the critical path?


B-E-G-H
c. What is the expected project completion time?
B-E-G-H = 2+5+4+4 = 15 days
d. What is the probability of completing this project within 16 days?

PROB PROB
VAR σ Z WEEKS(D)
(EXCEL) (EXCEL)
CRITICAL
PATH B-E-G-H 2.83 1.683250823 0.594088526 16 72.38% 27.62%

The probability of completing this project within 16 days is 27.62%

February 8th, 2018 8