Business project

EGEE-401 FINAL PROJECT - BUSINESS PLAN

Names of Group Members who contributed his/her fair share to the project:

FACTS Low High

Semi Company (makes one tool model only)

550,000,000 $ Annual Revenue

4,500,000 $ Tool Price

40% % Market Share

60 Seconds Processing time per Wafer

200 Hours MTBF of complete tool

4 Hours MTTR to repair complete tool

26,000 $ Scrap/y due to tool manfunctions

5 Number of actuators per tool

7 Years life of tool, product, and loan duration

8% % MARR Minimum Attractive Rate of Return (same for Motion)

8% % Interest on interest-only loan by Semi to Motion

78% % Engineering Cost Factor to qualify and design-in a new component (as a % of annual demand of the existing component)

5000 $ Unit Price of Old Actuator

10,000 Hours MTBF of Old Actuator

5 Years (Term of interest-only capital loan to Motion Co)

80% % of capital covered by loan

Motion Company (Makes superior wafer-lift actuator)

1 Seconds: New Actuator Processing-Time Savings per Wafer

26,000 Hours: MTBF of new actuator

11% % reduction in the probability of tool malfunction leading to scrapped wafers

950,000 $ Capital Equipment Required

7 Years useful life of Capital Equipment

1,900 $/Actuator Materials Cost

2,100 $/Actuator Labor Cost

1,400,000 $ Other Direct Cost (building & utilities)

5% % Indirect Costs/Revenue

40% % Tax Rate

5 Weeks-of-Sales Cash-Asset Requirement

4 Weeks-of-Sales Receivables-Asset Requirement

3 Weeks-of Cost-of-Goods-Sold Finished-Goods-Inventory Asset Requirement

5 Weeks-of-Materials-Expense Materials-Inventory Asset Requirement

4 Weeks-of-Materials-Expense Accounts-Payable Liability

ECONOMIC VALUE

Value per actuator of throughput improvement

1% 2% % Processing Time Savings

50,000 100,000 $ Value of throughput improvement per tool

15,000 30,000 $ Value of throughput improvement per actuator

Value per actuator of Tool Availability improvement

95% 100% %Availability of tool with old actuator = MTBF/(MTBF+MTTR)

200 220 Hours MTBF of tool with new actuators = ((Current MTBF of Tool)^-1 - 4*(MTBF of Old Actuator)^-1 + 4*(MTBF of New Actuator)^-1)^-1

95% 100% %Availability of tool with new actuator = MTBF/(MTBF+MTTR)

800 1,500 $ Savings per actuator =(%Down-time reduction)(Tool Price)/(Number of Actuators)

Value per actuator of scrap reduction

15,000 25,000 Value of scrap reduction over the life of a tool

3,000 6,000 $ Savings per actuator

Cost for Semi to change and requalify the design with the new actuator

80 150 Number tools produced per year (Semi Annual Revenue)/(Tool Price)

-250 -1,000 $ Cost of engineering design change to incorporate new actuators =(Egr Cost Factor)(Old Actuator Price)(A/P,i,Life)

Net Economic Value to Semi (per actuator) by switching to the new actuator

15,000 30,000 Sum of above values

Actuator Demand

611 300 900 Actuator Units/y = [Tools/y Production Rate](Actuators/tool) = [(Semi Revenue)/(Tool Price)](Actuators/Tool)

ECONOMIC VALUE PRICING

17,000 35,000 Price per actuator that would capture all economic value for Motion = (Net Economic Value to Semi) + (Price of old actuator)

4,000 10,000 Price/actuator that gives Motion Return-on-Assets = MARR (i.e. lowest possible price) (Use "Goal Seek" to temporarily set A135 = MARR by changing A67 )

3,000 10,000 Price per actuator currently paid by Semi

9,500 4,000 35,000 Price per actuator proposed to Semi (Manually enter your price)

INCOME STATEMENT - MOTION COMPANY (forecast for each year)

OPERATING REVENUE

5,804,500 4,000,000 16,000,000 $ Total Operating Revenue (Actuator Demand)(Price/Actuator)

OPERATING EXPENSES

Direct Cost of Goods Sold

1,283,100 900,000 1,200,000 $ Labor Cost

1,160,900 900,000 1,200,000 $ Material Cost

1,400,000 1,000,000 2,000,000 $ Other Direct Cost

135,714 100,000 200,000 $ Depreciation of Capital Equipment

3,979,714 3,000,000 4,600,000 Total Cost of Goods Sold

Gross Profit

Possible Range

1,824,786 700,000 13,000,000

Indirect Costs

290,225 200,000 1,200,000 Selling, General, & Administrative

80,000 100,000 300,000 Interest expense on debt to Semi

370,225 300,000 1,200,000 Total Indirect Costs

Net Income Before Taxes

1,454,561 600,000 13,000,000

Taxes

581,824.29 150,000 6,000,000

NET PROFIT

872,736 200,000 7,000,000

BALANCE SHEET - MOTION COMPANY (On First Day of Operation)

ASSETS

Current Assets

558,125 300,000 1,300,000 Cash

446,500 300,000 1,300,000 Accounts Receivable

229,598.90 250,000 400,000 Inventory (Finished Goods)

111,625 50,000 150,000 Inventory (Materials)

1,345,849 900,000 4,000,000 Total Current Assets

Fixed Assets

950,000 700,000 1,200,000 Equipment

Total Assets

2,295,849 1,600,000 5,000,000

LIABILITIES & EQUITY

Current Liabilities

89,300 50,000 100,000 Accounts payable

Long-term Liabilities

1,000,000 1,350,000 3,500,000 Debt to Semi

1,089,300 1,400,000 4,000,000 Total Liabilities

Equity

1,206,549 200,000 800,000 Stock

- Retained Earnings (None)

1,206,549 200,000 800,000 Total Equity

Total Liabilities and Equity

2,295,849 1,600,000

METRICS

Measures of Financial Health

1,256,549 500,000 3,500,000 Working Capital

15.1 1.0 40 Current Ratio (must be >2

11.3 1.0 40 Acid Test Ratio (must be >1)

41% 1% 250% % Return on Assets (Must be > MARR)

72% 1% 1200% % Return on Equity (Must be > MARR)

19.2 1.0 60 Interest Coverage (Must be >3)

31.4% 10.0% 80% Gross Margin

15.0% 1.0% 50% Net Profit Ratio (Margin on Sales)

Pre-tax IRR to Semi (from loan and net benefits)

Benefit to Semi Year

(3,000,000) (1,350,000) 0 Loan amount

200,000 13,000,000 1 Loan payment + Economic Benefits [Econ Benefits = (Max Price - Actual Price)(Annual Qty)]

200,000 13,000,000 2 Loan payment + Economic Benefits [Econ Benefits = (Max Price - Actual Price)(Annual Qty)]

200,000 13,000,000 3 Loan payment + Economic Benefits [Econ Benefits = (Max Price - Actual Price)(Annual Qty)]

200,000 13,000,000 4 Loan payment + Economic Benefits [Econ Benefits = (Max Price - Actual Price)(Annual Qty)]

200,000 13,000,000 5 Loan payment + Economic Benefits [Econ Benefits = (Max Price - Actual Price)(Annual Qty)]

200,000 13,000,000 6 Loan payment + Economic Benefits [Econ Benefits = (Max Price - Actual Price)(Annual Qty)]

3,000,000 13,000,000 7 Loan payment + Economic Benefits + Loan Payoff

- 75,000,000 Net Present Value =NPV(A137:A144)

7% 1000% IRR

500,000 20,000,000 Annual Profit if Motion could sell to all Semi competitors = (Motion Profit)/(Semi Market Share)

5,000,000 170,000,000 Value of Patent = PV(Profits from serving the whole market over the 15 year patent life)