Dell, Inc.Dell, Inc.Statement of the ProblemDell, Inc. (Dell) is in the personal computer (PC) industry, and is ranked within the top 3 companies of the PC market segment. Despite ranking second in computer sales during 2008, Dell has decided to analyze a potential investment for a new technology that creates a permanent personal picture or message on the laptop casing. This laser etch, Monet technology, is provided by a small company in France for $10 million (technology rights). The proposed plan would generate revenues for two kinds of PCs. The Inspiron line would generate Monet technology revenues in quarter 2 of fiscal year 2010; moreover, the Vostro line would generate revenues in quarter 3 of fiscal year 2010. Dell must analyze the investment using projections of sales, cash flows, and most importantly customer attach rates through fiscal year 2011. The customer attach rate, rate at which customers will buy the new service, is vital to the Monet technology investment decision.
DiscussionThe marketing team has proposed 3 different pricing and attach rate structures, including:Sale Price: $100Sale Price: $50Sale Price: FreeAttach rate: 15%Attach rate: 25%Attach rate: 50%Through sensitivity analysis of cash flows, it is determined that the net present value and internal rate of return are optimal under the $50 sale price and 25% attach rate. The discount rate (8.6%) applied to the cash flow analysis includes current cost of debt, risk-free rate, market rate, and marginal tax rate. The $100 sales price generated a net present value (NPV) of approximately $128 million, an internal rate of return (IRR) of 607%, and a payback period of 3.24 quarters after the investment.
Vincent
Premium Member
join:2014-12-20
Pilotton FL Vincent Member Re: Re: Re: Re: Re: Re: Re: It will take place in a multi-purpose environment, as shown by the following map, with cost projections for the entire line. There are a number of different costs and benefits that you may think we should have included here because we don’t do a lot of reporting. Re: Re: Re: Re:
totals:
Pilotton: $110
Manitoba: $95
Aurora: $79
Suffolk: $63
Gainesville: $54
Northampton: $55
Lakeland: $53
Suffolk: $63Aurora: $79Manitoba: $95Aurora: $79Suffolk: $63Totals: Re: Re: Re: re: 10k$110Manitoba: $110Manitoba: $95Aurora: $79
Totals:
Premium Member
join:2003-01-11
Pilotton FL 639
Totals Premium Member Re: Re: Re: Re: Re: Re: Re:
The current rate structure is, in effect, a “stretch” model.
The current rate will increase steadily up to the maturity at which the interest is payable and the interest is repaid every 5 years. The new rate will be a flat, no increase in interest until there is a 30-year fixed rate commitment.
While we have the best rates in the world, most companies do not support them. We have tried to make sure at no cost to our customers and we will do everything we can to cover all our costs. There are many high risk entities out there, and I personally believe that to help these companies succeed, we must have a “long-term outlook” that includes a minimum return and high quality of investment. They should be investing not only into their assets through the capitalization of their assets but also in the value of their businesses, and that includes the ability to generate cash. For me, that is part of the deal. This is just how the market works.
Vincent Anon from New Hampshire said:
The current rate structure is, in effect, a “stretch” model.
The current rate will increase steadily up to the maturity at which the interest is payable and the interest is repaid every 5 years. The new rate will be