Capital Budget Essays

884 Words Nov 30th, 2014 4 Pages
General Motors Sample Case Study

Next Generation C hevrolet

Instructions
You have 1 hour and 30 minutes to complete the case below, which involves building an Excel model and preparing a written memo. You will walk through your analysis as part of the interview process. The GM team will ensure your case material makes its way to the proper interview room. By the end of the allotted time, you should: Write a memo in Word no longer than one page outlining your analysis of the case problem and your recommendation Be prepared to walk your interviewers through your Excel model and present your recommendation (you can use either the Excel or the Word document as back up for your discussion; no need to
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Variable costs Material costs Standard: $16,000 per vehicle Luxury: $19,000 per vehicle Logistics and Warranty cost (includes freight in and out of the plant and to the dealer lot as well as warranty expenses): additional $1,500 average per car Manufacturing cost per unit is calculated at $4,500 per unit, irrespective of the model manufactured Assume 3% reduction in material, logistics, and manufacturing cost per year over the lifecycle of the car as the supplier base becomes more efficient and raw material and manufacturing costs are optimized 4. Other costs Total advertising and marketing budget for the car is $150M in the first year of launch, $75M in each of years 2 to 4, and $125M in year 5 Assignment 2: Recommendation Based on the projections you derive in Assignment 1, make a recommendation on whether or not to proceed with this discrete product program, the launch of the new generation . NPV (using 15% discount rate). In addition to the projections derived in Assignment 1 and the NPV analysis, make sure to use additional analytical and/or qualitative arguments to support your

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