Working Capital Summary

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Jennifer Sobieski, a marketing analyst – cost engineer
To evaluate whether or not WCI should sell a division of the firm
· which has been losing market share
· and requires a great deal of new investment to remain competitive.
CEO – Steward workman
CFO – Tom LaPonte
A personal date appliance (PDA)
- once led the market in feature and innovation
- Fall prey to competition.
· Political issues involving the wayward division
· CEO has decided to use the capital committed to Bernoulli to boost the ailing performance of other parts of the firm.
Bernoulli device:
· a complete new and innovative interface for the WCI PDA.
· Handheld device
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- 1%decline in sale for each quarter. This was due to the compatibility of the device.
Current progress:
To make it compatible to every personal computer on the market;
Bernoulli labs were working on major upgrades on the device as well as on the interface software
To complete the research, $18 million was needed for the following month for its development.
With the new product, an estimation of 8% gain from the market within the 1st year, and 4% per year after that.
Rebuttal from CEO:
The amount requested was ‘insane’ and it can “earn at least our cost of capital for the shareholders”
- The firm had enough cash available for this type of investment – Jennifer claimed that he was taking the allocation of that money personally.
Jennifer had forecasted
- unit sales for the periods 2004 – 2009 (6years)
- calculated demand with and without the market share from the new product expected return.

Exhibit 1 - Unit sale projection

Cost of good sold: 60% of the unit price operating expenses (excluding depr.): 24% of total revenues expected sale units by end of 2003 @ $495: 300,000

from the revised Bernoulli:
COGS 54% of the retail price operating expenses: 26% (due to advertising)

strategic planning purposes:
Bernoulli was treated as an asset, allocation of depreciation with cost recovery (MACRS) 10 yr class, with 5 yrs of operation.
1999 - invested $56 million.

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