Whirlpool Europe Essay

1932 Words Feb 27th, 2015 8 Pages
Financial Management fin855
Whirlpool Europe Case Report
Date: March 2nd, 2015

The benefits proposed in the case are all reasonable. Half reduction in potential optimal DSI improvement is neither too optimistic, nor too conservative. The forecasting on profit margin is based on sales increase. As a benefit resulted from economies of scale enhance, but not from products upgrading, the limited .25% gross margin improvement is quite reasonable. Together with that, if the ERP system can be effective as expected, we do have reason to expect to improvement on sales and gross margin. The benefit improvement analysis is really comprehensive to include also internal changes such as employee elimination and related savings.
Although they all
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And in future operation, the change of strategy can also require a new system. Based on my calculation and the assumptions from the case text, I would recommend this project. It can provide an 82.98 million positive economic value to Whirlpool Europe. However I do have a few concerns. The forecasting and calculations are based on large quantity of assumptions, and some of them are pretty optimistic, such as the 25% percent increase in unit sold. Thus, the actual result of this project is subject to a volatility based on the accuracy of the date and forecasting provided in case.

Exhibit 1 Total Cash Flow Changes

Cost of Capital
9.00%

Tax
40.00%

(in millions) 1999
2000
2001
2002
2003
2004
2005
2006
2007

 Gross Profit

0.00
4.03
15.57
30.82
41.94
47.63
49.16
49.16
49.16
Operating Expenses) -3.61
-2.04
-1.44
-0.69
-0.53
-0.08
0.27
0.30
0.33
 EBITDA

3.61
6.06
17.01
31.51
42.48
47.71
48.90
48.86
48.83
( Depreciation) 0.98
2.78
4.20
5.08
5.16
4.28
2.61
1.39
0.91
EBIT

2.63
3.28
12.81
26.43
37.32
43.43
46.28
47.47
47.92
( Taxes) 1.05
1.31
5.12
10.57
14.93
17.37
18.51
18.99
19.17
 NI

1.58
1.97
7.68
15.86
22.39
26.06
27.77
28.48
28.75
 Depreciation 0.98
2.78
4.20
5.08
5.16
4.28
2.61
1.39
0.91
 CFO

2.56
4.75
11.88
20.94
27.55
30.34
30.38
29.88
29.66
(  Cap Ex)

4.90
9.00
7.10
4.40
0.40
0.40
0.40
0.40
0.40
( W/C) 0.00

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