PRYSOR CO

Role of WTO

Agreement Est. general agreement on tariff and trade

Barrier Reduce barrier by preventing protectionist measure
Forum Forum for negotiation and dispute resolution
Free trade By applying most fav. Principle betn its members
Implication of free trade agreement

Import and sales No restriction on movement of goods and services

Non member Movement with non-member subj. to tariffs & other protectionist measure

REPORT TO BOD

Introduction

Requirements This report……

Assumptions

Accurate Variable such as revenue, costs, taxation, WC, investment

Tax Exempt from tax for 2 year
Working capital Have sufficient working capital
Cost of capital Basis for use not explained
Exchange rate Predict using PPP theory assumes rate change due to inflation
Realisable value Questionable if it is sold as going concern, 0 residual value = negative NPV
Significance and concern with duration and sensitivity

Duration

Meaning/benefit Average time , consider time value of money and whole life
Problem determining appropriate target duration year against which it compare
Assption/decision rule Shorter duration lower risk may bias toward short term project
Sensitivity of revenue

Meaning Selling price have to be 8.1% lower to have 0 NPV

Reason for sensitivity To know whether selling price could set lower to increase chance of success
Problems Change of price depends on pricing policies of competitor
Not consider interaction and trade off between price and quantities sold
Sol./recommendation Supplement sensitivity of other elements, consider assumption, interaction,
market scenario and simulation method
Conclusion

Financial ground Positive, undertake but also consider assumptions

recommendation Sensitivity and scenario analysis

Complied by: AN Accountant

Date: xx/xx/xxxx