Lincoln Sporting Goods Case Summary

While reviewing the Lincoln Sporting Goods case our assumptions of optimistic, best guess, pessimistic, and base performed accurate and as a result was left alone. The following assumptions can be seen in the resulting chart. Variables in this case include; existing production, limited production, cost of goods sold for full production, unit sales for new/old cleats, sales price, discount rate, probability of failure and success. A seventy-five percent probability of success is what the base case assumes; therefore probability of failure is twenty five percent. Fifteen percent is the discount rate. Since this is the base case, there’s not an increase in unit sales or sales price. Also, cost of goods sold was not changed. For explaining the …show more content…
For the pessimistic scenario the business has more risk, which requires a greater rate of return. This is why the discount rate raised to twenty five percent. While sales grew two percent, unit sales for the new cleat declined ninety percent. Furthermore, the old cleats unit sales raised one hundred thirty percent. The old cleats cost of goods sold stayed at seventy percent and for the full production it declined by two percent. Also, the cost of goods sold for the limited production raised by one percent. In the following chart is the best guess scenario that shows the possibility of what the firm should await. Since probability of failure is twenty five percent, the best guess scenario yields the probability of success to seventy-five percent. While pulling information from the best-case scenario, the discount rate has changed back to fifteen percent. Furthermore, during this scenario it is expected that sales Group 8 will have an annual growth of four percent. Also, for both old and new cleats unit sales will grow. The old cleat will rise by twenty percent and the new cleat will rise ten percent from the base case. For existing and new cleats cost of goods sold stays at base case