Case Study: Custom Snowboards

1902 Words 8 Pages
Internal Risks Internal risks are those that arise within the organization that management has some level of control. One internal risk would be human factors. Human factors are the relationship and interaction between a person and their machine and/or tools. (Corrigan, 1999) In this case, human factor is tied to a person’s skillset or knowledge about the role. For Custom Snowboards to look at a European expansion, the skillset of the employee hired and how they perform on the job is a risk. Custom Snowboards can mitigate this risk by providing ample opportunities to cross-train with US based colleagues and/or experts that will be onsite at the European facility to help get their operations up and running. A second internal risk would be …show more content…
The company has researched alternatives of paying for the building and equipment on a time basis at a 6% financing rate. Analysis has been performed on the two options of leasing verses purchasing. The present value of cash outflows for the leasing option is $653,355. This option assumes a 5 year payment annual payment of $195,000 with a final cash buyout of $50,000. The purchasing option has a 5 year annual payment of $187,917. The present value of cash outflows for this option is $809,409. The purchasing option is roughly 24% greater in total costs than the leasing option. Based on this analysis, it is recommended that Custom Snowboards lease the building and …show more content…
This would require Custom Snowboards to come up with the required capital to pursue this transaction. The Net Present Value of European SnowFun Projected Cash Flows would not show a return on the investment until the 5th year, year 19. The Net Present Value is the total present value of $732,522 minus the investment price of $720,000 which results in a positive value of $32,522. The pros of an acquisition are the ownership of an existing snowboard manufactures with a good customer base. This is less risk to Custom Snowboards as compared to a new build options. The cons for the acquisition the investment cost of $720,000 along with the fact that European SnowFun is manufacturing a less durable product. A long-term strategy plan would need to be implemented along with additional capital to make “quality”

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