Paraphrase

Flash Memory Inc. Strategy Paper

Before I begin writing my analysis I would first follow with a SWOT analysis and throughly investigate the problems and data given in the case. By investigating both internal and external environments of Flash, the bigger picture needed to figure out the solutions will begin to form. Once all is complete I can then begin by writing my strategy paper to help solve the problems listed in the case.

In order to estimate Flash Memory’s required external financing, you must look on to the forecasted income statements and balance sheets for year-end 2010, 2011, and 2012. Using the assumptions given throughout the case you can project the forecasted income statements and balance sheets for those years. With this valuable information, we will look at Flash’s amount of sales we expect them to generate next year. Step by step; by using the annual sales growth over the most recent 5 year period, we can project sale. We would then calculate the company's cost of goods sold and operating expenses using the average percentage of sales method, subtract cost of goods sold and operating expenses from sales to determine pre-tax income, calculate the company's taxes for next year, and subtract taxes from pre-tax income to compute net income. Then project next year's current assets using the same percentage of sales method. Current assets include cash, inventory and accounts receivable. Getting liabilities we would project next year's current liabilities using the historical percentage of cost of goods sold, subtract current liabilities from current assets to determine the company's working capital needs. Finally estimate the company's projected capital expenditures using the percentage of sales method and subtract the company's projected working capital needs and capital expenditures from net income to determine the amount of external financing needed.

Accept the investment opportunity. But first you would find the NPV and IRR on the projected product line. Then find the WACC and cost of capital. Once all found you could see that Flash should invest in the new product line because of a positive NPV and the IRR is greater than both the WACC and cost of capital. This analysis evaluates the forecasted cash flows by discounting them back over the life of the project using that duration as well as the WACC. Along with getting a positive return on the product line the new products should help Flash keep their reputation of producing new quality products which in turn should capture more of the market. Especially with the rate of new products in the memory industry, Flash must keep these new products coming in order from the company dying.

In order to carry out the product line we had to acquire more debt which will now affect the working capital and in the end effect the balance sheet as well. One important factor will be to see if we will be able to pay off interest on sales. By calculating cash we received from previous sales data we can get some accurate numbers which will help solve the issue. Different equity options can involve taking on debt or acquiring equity through the sale of shares. To find a figure associated with equity received from the sale of shares requires the price of the shares and the amount sold.