Instructions In this fictitious case, you are a financial analyst on the Medical Imaging Equipment Strategy Team of General Voltaic (GV), an American multinational conglomerate. Your responsibilities include evaluating the financial and strategic implications of corporate investment decisions. Attached are the relevant emails and data you have received from Economics, Manufacturing, Marketing, Product Development, and Tax Counsel teams. For your presentation to your superiors: 1. Review the attached material and prepare a one-page executive summary that addresses the alternative strategies outlined in the series of email communications. 2. Please include the following items in your summary: a. Financial analyses for the alternative provided, as directed by the manager in his email. b. Your recommendation if the alternative should be chosen. C. Additional information that would assist you in your evaluation of the alternative 3. Please submit your one-page executive summary, your calculations, and any other supplemental analyses you have done. Analyst, I need your help in preparing a study to localize our product, the Volision E10 ultrasound machine, to the country of Chile. Chile's currency, the Chilean peson (CLP) has weakened considerably in the past year against the US dollar (USD) causing the translation of our revenue from our Chilean sold units to degrade significantly. The leadership team has requested that we find a way to mitigate this currency volatility. One way we can do this is to better match the currency of our costs to the currency of our revenue. As our sales in Chile constitute a larger mix of the total global sales of our portfolio going forward, localizing the product and creating some CLP cost exposure may help balance our overall currency portfolio and minimize the profit impact of volatile currency movements. See the note below for additional texture and key financial data that will be required for the analysis. Your analysis should provide a profit impact sensitivity analysis using the relevant range of CLP:USD provided below. NB: 1. Your analysis should focus on a decision analysis for the localization alternative. The US sourcing location is in our present Business Plan. Provide an incremental view to our business plan shown in millions (USD). 2. The localization alternative will have no impact on our sale revenue, so all the data I have sent over is cost related. There is no need to include revenue in the incremental decision analysis. 3. Given the tight timing on this project, assume a one-period analysis for this study for simplicity (i.e., calculate the profit impact for one-year). At a later date, with better data and an aligned cost of capital, we will analyze the entire five-year product cycle. 4. Ryan, from the Corporate Economics team, suggested we study a three-point range for the exchange rate (500:1, 600:1, and 700:1). As you will see, there are trade-offs with the localization alternative. Let me know your recommendation based on the available data. And let me know of other risks or concerns (financial and non-financial) that we should communicate to our leadership team. Thanks for your help on this one! Johnny B. Goode, Manager New Model Program Manager, As a follow-up to our discussion, here is the necessary data to complete the localization study requested by the leadership team prior to the next Board meeting. U.S. Source (reflects our present Business Plan): Investment - $600 million in re-tooling an existing facility where the new equipment will be produced Contribution Costs - All shown in USD. Chilean Source Investment - $1 billion will enable us to build a new facility where the new equipment will be produced. Contribution Cost - All costs sourced in CLP. Data shown has been converted using the noted exchange rate as assumed in our latest business plan. Data for Localization Alternatives CLP Manufacturing Source Sales Location USA CLP USA USA CLP CLP USA Annual Sales (units) Initial Investment (in mill.) $ 45,000 600 55,000 600 55,000 1,000 45,000 1,000 $ $ $ $ Contribution Cost Impact (per unit) Material Cost $ 20,000 Freight 2,500 Variable Labor 1,600 Duty & Tax 10,000 Total CCI (per unit) 34,100 $ 20,500 1,000 1,600 100 23,200 18,500 2,500 800 800 22,600 18,000 1,000 800 3,000 22,800 Total Cost (in mill.) $ 1,535 $ 1,276 $ 1,243 $ 1,026 Exchange Rate RIC/USD USD/RIC 600 0.001666667 600 0.001666667