Stryker Corporation: in-Sourcing Pcbs

The capital budget process in place is to use the payback period and return on invested capital (ROIC) for the project. The payback period criterion is a flawed way to determine the value of the project because it does not take into account cash flows after the required payback period (7 years). For example, if the Energy Gel project had not

The Conch Republic is an organization which produces reputable electronics is seeking to advance one of their current production lines to stay abreast to changing technology. The company is seeking to introduce a new smart phone with the hopes of boosting the company’s revenue and reputation as a smart phone producer. As a person hired to assess the financial undertaking of Conch Republic an overview of the projects planned expense must be generated. However, in order to accomplish this task a capital investment analysis must be conducted in order to determine the projects viability. This will be done by analyzing several things. Those things that must be understood are the projects payback period, the net present value (NPV), internal

It is easy to analyze Stryker’ case. Stryker’s products are simple, not as complicated as Microsoft and Johnson & Johnson. Moreover, Stryker has been ranked 61st out of 100 in “Fortune’s 100 Best Companies to Work For.”

Technology is obviously a critical component of this business: it will be important to stay up to date on both equipment and knowledge to remain competitive in the future

The initial investment rate of return (IIRR) method also overlooks the time value of money. The IIRR method considers the effects of taxes and depreciation on investments. This is something that is overlooked by the payback method. The IIRR method however, does not take into account operating cash flow, which can be a significant consideration. Senior management is more likely to buy in if the IIRR is greater than the cost of capital to the organization (McCrie,

a. What is each project’s payback period? According to Financial Management: Principles and Applications Payback period is defined as “A capital-budgeting

The view of present company situation. Company managed to successfully market itself for 3 decades as well as expand very fast through retail franchising model. Constant product development has shown positive results in sales. Trading relationships with communities in need has enabled company to outsource high quality sustainable and relatively cheap materials.

Markov Manufacturing recently spent $15 million to purchase some equipment used in the manufacture of disk drives. The firm expects that this equipment will have a

SOLIDWORKS/PCB. This is a result of Cliff, Lew, and Rob’s efforts to modify the Altrium mini site to promote a responsive SolidWorks mini website promoting SolidWorks PCB product line, www.solidworks.com/pcb. This mini site will promote SOLIDWORKS PCB as a professional PCB design tool engineered specifically to bridge the gap between electrical and mechanical designs. This mini website would benefit greatly by being promoted on Facebook.

According to the Market Realist, between years 2012 and 2014, Stryker invested approximately $3.4 billion in acquisition and merger deals (Collins, 2016). This can be a good indicator because the more they invest then this will lead to expansion in portfolios and growth in strategies. The financial history of the company shows that they have good growth rate and operational performance. After researching the industry trends, Stryker seem to be on track with their operational performance and the innovative minds. Cash flow shows that it has grown by 70% in the last five years. This compared to other companies can be seen as a significant growth and it shows that whoever is in the managerial positions are doing something right. In addition, their

The formula for the payback method is simplistic: Divide the cash outlay (which is assumed to occur entirely at the beginning of the project) by the amount of net cash flow generated by the project per year (which is assumed to be the same in every year). ("Payback Period Formula - AccountingTools,"

The use of an accounting rate of return also underscores a project 's true future profitability because returns are calculated from accounting statements that list items at book or historical values and are, thus, backward-looking. According to the ARR, cash flows are positive due to the way the return has been tabulated with regard to returns on funds employed. The Payback Period technique also reflects that the project is positive and that initial expenses will be retrieved in approximately 7 years. However, the Payback method treats all cash flows as if they are received in the same period, i.e. cash flows in period 2 are treated the same as cash flows received in period 8. Clearly, it ignores the time value of money and is not the best method employed. Conversely, the IRR and NPV methods reflect that The Super Project is unattractive. IRR calculated is less then the 10% cost of capital (tax tabulated was 48%). NPV calculations were also negative. We accept the NPV method as the optimal capital budgeting technique and use its outcome to provide the overall evidence for our final decision on The Super Project. In this case IRR provided the same rejection result; therefore, it too proved its usefulness. Despite that, IRR is not the most favorable method because it can provide false results in the case where multiple negative

In fully investigating all of our calculations we are fully invested in using the Net Present Value figures we calculated as a means of ranking the eight projects. In doing so we found reasons in which why the Net Present Value was our benchmark for ranking the projects and why we did not use the Payback Method. The Payback Method ignores the time value of money, requires and arbitrary cutoff point, ignores cash flows beyond the cutoff date, and is biased against long-term projects, such as research and development and new projects. When comparing the Average Accounting Return Method to the Net Present Value method we found that the Average Accounting Return Method is a worse option than using the Payback Method. The Average Accounting Return Method is not a true rate of return and the time value of money is ignored, it uses an arbitrary benchmark cutoff rate, and is based on accounting net income and book values, not cash flows and market values. Plain and simply put, the Net Present Value method is the best criterion to use when ranking these eight

The Guillermo Furniture Company has realized that their business strategy is no longer sustainable. The external environment has changed significantly and the company is facing pressure from oversees firms that have automated much of their furniture production and manufacturing. Despite the fact that Guillermo Furniture has access to relatively inexpensive Mexican labor, the company is still struggling to be competitive in the market due to foreign competition. Therefore, Guillermo has identified various alternative strategies that it wishes to consider in order to reinvent its business and become more competitive. It is recommended that Guillermo invest in new equipment that can modernize its manufacturing capabilities. An investment in a computerized lathe shows a worthwhile return on the company's investment and will also position them for future growth.

The internal rate of return (IRR) and the net present value (NPV) techniques are 2 investment decision tools that satisfy the 2 major criteria for the correct evaluation of capital projects. This criterion is that the techniques should incorporate the use of cash flows and the use of the time value of money. This makes them viable techniques for evaluating investment proposals.