3 Year Planning Y0 Y1 Y2 Y3 Total

Accounting Strategy 20% 25% 25% 25%

Investment (100,000.00) (100,000.00)

NVRVC -30,000 -30,000 -30,000 (90,000.00)
Total Outflow (100,000.00) (30,000.00) (30,000.00) (30,000.00) (190,000.00)

Inflow 125,000.00 125,000.00 125,000.00 375,000.00

Net Cash Flow (100,000.00) 95,000.00 95,000.00 95,000.00 185,000.00

Discount Rate 1.00 0.91 0.83 0.75
NPV (100,000.00) 86,363.64 78,512.40 71,374.91 136,250.94
Less investment. Although there is a declining return on investment in 3
Notes: years, strategy maintains positive NPV.
Disadvantage
Addresses short term goal only, possible for a firm to perform very
satisfactory in a short run, neglecting new product, management and
training development at the expense of long term profitability.

3 Year Planning Y0 Y1 Y2 Y3 Total

Marketing Strategy 20% 30% 30% 30%

Investment (200,000.00) (165,000.00) (50,000.00) (30,000.00) (445,000.00)

NVRVC -30,000 -30,000 -30,000 (90,000.00)
Total Outflow (200,000.00) (195,000.00) (80,000.00) (60,000.00) (535,000.00)

Inflow 260,000.00 260,000.00 260,000.00 780,000.00

Net Cash Flow (200,000.00) 65,000.00 180,000.00 200,000.00 245,000.00

Discount Rate 1 0.91 0.83 0.75
NPV (200,000.00) 59,090.91 148,760.33 150,262.96 158,114.20
NPV is increasing each year although at then end of 3 years NPV is still
below the initial investment. Marketing at this stage is reaching
prospective consumers and turning them into customers of
Notes: products/services.

3 Year Planning Y0 Y1 Y2 Y3 Total

Manufacturing Strategy 20% 0% 0% 50%

Investment (500,000.00) (500,000.00)

NVRVC -30,000 (30,000.00)
Total Outflow (500,000.00) - - (30,000.00) (530,000.00)

Inflow 750,000.00 750,000.00

Net Cash Flow (500,000.00) - - 720,000.00 220,000.00

Discount Rate 1 0.91 0.83 0.75
NPV (500,000.00) - - 540,946.66 40,946.66
Notes: High Return at Y3, for long term profitability

A flexible manufacturing system (FMS) is a production method that is designed to easily adapt to
changes in the type and quantity of the product being manufactured. Machines and computerized
systems can be configured to manufacture a variety of parts and handle changing levels of
production.

Cost benefit analysis provides a basis of comparing the total expected cost for each option against
the total expected benefits, to see whether the benefits outweighs the costs and by how much.
 Unit
Sales 10,000
Less Volume related variable cost 5,000
Contribution Margin 5,000
Less Non-Volume related variable cost 3,000
Cash Earnings before interest and taxes (EBIT) 2,000

50,000.00

(a)

(c)

(c)

(b)

(c)
(d)
Per Unit $ Total $
100 1,000,000.00
100 500,000.00
0 500,000.00
100 300,000.00
100 200,000.00