Imagine that you have been hired as a consultant and you need to provide a report about HomeNet according to the information requested (Deadline 28 09 22 at 11 59) Based on extensive marketing surveys, the sales forecast for HomeNet is 200 000 units per year Given the pace of technological change, Cisco expects the product will have a four year life It will be sold through high end electronics stores for a retail price of Kr 375, with an expected wholesale price of Kr 250 Cisco expects total engineering and design costs to amount to Kr 10 million for the initial design of the product One the design is finalized, actual production will be outsourced at a cost of Kr 120 per unit In addition to the hardware requirements, Cisco must build a new software application It is expected to take a dedicated team of 20 engineers at a full year to complete The cost of a engineer is Kr 300 000 per year As part of new equipment, Cisco needs an investment of Kr 6 5 million Cisco expects to spend 3 million per year on marketing and support for the product Assuming straight line depreciation and the current corporate tax of 20 , what is the gross profit and net income associated to the new product HomeNet will have no incremental cash or inventory requirements However, receivables related to HomeNet are expected to account for 12 of annual sales and payables are expected to be 14 of the annual cost of goods sold (COGS) Present the FCF for HomeNet If the appropiate cost of capital is 13 , using the NPV rule, what do you recommend Do you achieve the same conclusion using the IRR rule Cisco is considering an alternative manufacturing plan for the HomeNet product The current plan is to fully outsource production at a cost of 120 per unit Alternatively, Cisco could assemble the product in house at a cost of 90 per unit However, the latter option will require an investment of 5 million upfront for operating expenses and Cisco will need to maintain inventory equal to one months production starting year 1 Which alternative do you suggest Note that payables to the suppliers appear only in year 1 and will be payed back until year 5 Following the alternative manufacturing plan, at what cost per unit for the outsourced units would Cisco be indifferent between outsourcing and in house assembly Present your solution in analytical terms, and using the formula Goal Seek in excel (Hint compute how percentage change of cost per unit affects the NPV) 7 Following the alternative manufacturing plan, alternatively, at what level of annual sales, in terms of units sold, would Cisco be indifferent between these two options Present your solution in analytical terms, and using the formula Goal Seek in excel Also, what can be classified as a fixed cost What happens with the importance of the fixed costs after increasing the units produced

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Imagine that you have been hired as a consultant and you need to provide a report about HomeNet according to the information requested (Deadline 28.09.22

Imagine that you have been hired as a consultant and you need to provide a report about HomeNet according to the information requested (Deadline 28.09.22 at 11:59)

Based on extensive marketing surveys, the sales forecast for HomeNet is 200 000 units per year. Given the pace of technological change, Cisco expects the product will have a four-year life. It will be sold through high-end electronics stores for a retail price of Kr. 375, with an expected wholesale price of Kr. 250.

Cisco expects total engineering and design costs to amount to Kr 10 million for the initial design of the product. One the design is finalized, actual production will be outsourced at a cost of Kr. 120 per unit.

In addition to the hardware requirements, Cisco must build a new software application. It is expected to take a dedicated team of 20 engineers at a full year to complete. The cost of a engineer is Kr 300 000 per year. As part of new equipment, Cisco needs an investment of Kr. 6.5 million.

Cisco expects to spend 3 million per year on marketing and support for the product.

Assuming straight-line depreciation and the current corporate tax of 20%, what is the gross profit and net income associated to the new product?
HomeNet will have no incremental cash or inventory requirements. However, receivables related to HomeNet are expected to account for 12% of annual sales and payables are expected to be 14% of the annual cost of goods sold (COGS). Present the FCF for HomeNet.
If the appropiate cost of capital is 13%, using the NPV rule, what do you recommend?
Do you achieve the same conclusion using the IRR rule?
Cisco is considering an alternative manufacturing plan for the HomeNet product. The current plan is to fully outsource production at a cost of 120 per unit. Alternatively, Cisco could assemble the product in house at a cost of 90 per unit. However, the latter option will require an investment of 5 million upfront for operating expenses and Cisco will need to maintain inventory equal to one months production starting year 1. Which alternative do you suggest? Note that: payables to the suppliers appear only in year 1 and will be payed back until year 5.
Following the alternative manufacturing plan, at what cost per unit for the outsourced units would Cisco be indifferent between outsourcing and in-house assembly? Present your solution in analytical terms, and using the formula Goal Seek in excel. (Hint: compute how percentage change of cost per unit affects the NPV).

7. Following the alternative manufacturing plan, alternatively, at what level of annual sales, in terms of units sold, would Cisco be indifferent between these two options? Present your solution in analytical terms, and using the formula Goal Seek in excel. Also, what can be classified as a fixed cost? What happens with the importance of the fixed costs after increasing the units produced?