Stryker Corporation: in-Sourcing Pcbs Essay examples

1138 Words May 12th, 2013 5 Pages
Stryker Corporation: In-sourcing PCBs

Table of contents:

Executive summary

1. Introduction 2. Analysis of current position 3. Analysis of new project 3.1 Methodologies and processes of Valuation 3.2 processes of Valuation 4. Conclusion

References

Appendices A & B

Executive summary:
The executive for Stryker Corporation recently considered setting up own factory to produce Printed circuit boards (PCBs) – a key electronic component of many of Stryker instrument’s medical products due to a big concern of current shaky sourcing suppliers. This proposal is targeted on the feasibility of the investment on financial projection such as Net Present Value, Internal Rate of Return and payback period as well as its business
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On the downside, it requires a huge capital and labor input .Therefore, it is crucial to access the investment on financial side.

3. Analysis of new project
3.1 Methodologies of Valuation
The proposal is mainly examined and verified on Net present value (NPV), Internal rate of return (IRR) and Payback period for this stand-alone project .

3.2 Processes of Valuation
Net present Value (NPV) The Incremental cash-flows on each year during the strategy period from 2004 to 2009 need to be found to get NPV ,which is used in capital budgeting to analyze the profitability of an investment. ( Assume year 2003 is year 0 on the time line ,then year 2004 is year 1…year 2009 is year 6). Incremental cash flow refers to the additional operating cash flow received from taking on a new project. It is most desirable to produce a positive incremental cash flow as this means that the company’s overall cash flows will grow once the project is accepted. (investopedia 2013). There is an initial investment in time 0 (year 2003) which includes all the expected capital expenditure (building cost, IT cost, equipment cost and furnishings cost) and non-capital expenditure (architect and engineering fees, taxed at 36%), totalled $6187178, see in Appendix B (Luehrman, p. 4). Year one’s cash-flow in 2004 consists of after-taxes income plus

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