Carded Graphics, Llc Harvard Case Solution & Analysis

Carded Graphics, Llc Case Study Help

Installing a new pager can reduce the cost of graphics on the card. The details are as follows:

  • Variable cost savings are estimated at about 11 dollars perton, and multiplied by the ton of daily production and the number of days in years, which results in approximately:147,606 dollars per year.
  • Savings of approximately 16,000 dollars per year, can be achieved through reducing the waste from new machinery
  • Finally, revenue from sales should be accounted for as positive cash inflows when the new printer expires, i.e. 120,000 dollars in sales value,which is provided in the case study.

Marginal cash flow after tax was calculated based on the exposures. The calculation period is 10 years, starting in the year 2009 and ending in the year 2018. In addition, the initial capital investments were consolidated at the end of fiscal year 2009 and CAPEX was valued at 700,000 dollars.

Nevertheless, at the end of the year 2009, a turnover of 14 million dollars was also consolidated, increasing by 7.00 percent and 8.00 percent, respectively, on average for the two indices. Consequently, the percentage of results obtained is 7.50 percent of the turnover of Card Graphics.

In addition, the cost of products sold increased by almost 2.00 percent, based on the information available in the present case. As a result, the total cost of goods of 10.75 million dollars increased by 2.00 percent; every year. Selling and administrative expenses also increased by 2.00 percent every year.

Therefore, we get the latest interest and pre-tax income figures over 10 years. In this case, the figure was obtained based on the additional administrative costs, while 22,500 dollars expenditure increased by 2.00 percent in every year.

However, working capital is also consolidated by deducting current liabilities from current assets and applying a growth rate of 2.00 percent where applicable. The new paper cutter has sales proceeds at the end of the ninth year of 120,000 dollars and cost savings depend on avoiding the new tenants.

He also calculated the result based on the sale of the old press, with a loss of 11,000 dollars. Interest expense is also calculated by applying a 2 percent growth rate to interest expense, for the 2009 financial year. The amortization also amounts to 700,000 dollars, dividing the fiveyear cost of the printing press by the useful life, and deducting the remaining amount from the cost of the new machine 120,000 dollars.

Therefore, the depreciation is calculated at 116,000 dollars, which has been shown in the Exhibit 4 of the document. In addition to this, nine years of pre-tax cash was acquired by using these savings and costs. Pre-tax total cash flow should accept a tax rate of 30 percent and assume that in the year 2009; the income tax expense should be divided by pre-tax income. Furthermore, the table for sensitivity analysis are provided in the document’s Exhibit 3.

Recommendations:

It has been recommendedthattheCarded Graphics should opt to purchase a new paper machine. The reason behind this recommendation is that the business will get benefit from further production and an increased capacity by doing so. Secondly, the waste and variable costs of the new machine will be lower than that of the old machine, which will save ahugeamount of money for the company. Finally, the valuation of investments also shows a positive net present value, which favors the investment for Carded Graphics in new machine......................................

 

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