1. Fixed costs are expected to be:
   1. Fixed marketing costs are $2,000,000 per year.
   2. Fixed manufacturing costs are $4,000,000 per year.
   3. Fixed G & A (general & admin) expenses are $2,500,000 per year.

 

1. OCP has an average tax rate of 22.5%

 

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1 Year Financial Model

i) The initial investment to launch the product is $20.0 million which will be spent in 2023. Included in this budget would be to finalize product development, setup of production facilities and initial marketing campaign for the product launch.  

 

Instructions and Follow-up Questions: 

1. Create a Financial model to detail the prospective performance of the company.
   1. Please include a dedicated column for a common-size (aka %-of-sales) analysis.
2. ROI - What will be OCP's expected 1-year ROI for this project?
3. Gross and Net Margins:
   1. If OCP were able to reduce their direct manufacturing costs to $11.50 per unit, what would be their new Gross and Net Profit margin figures as a percentage of sales?

What will be OCP's revised expected 1-year ROI for this project?