PRODUCT and PROCESS DESIGN LECTURE 07 Warren D. Seider, University of Pennsylvania 1 Profitability Analysis Warren D. Seider University of Pennsylvania Philadelphia, Pennsylvania Holger Nickisch Consultant Profitability Analysis 2 Approximate Measures of Economic Goodness TCI C tax) - or After (Pretax Earnings Annual (ROI) Investment on Return = WC TPI C C + C - S Cost Production Total Usually Assume 330 days of operation – 330/365 = 0.9041 = operating factor Project production First year - 1/2 × 0.9 capacity Second year - 3/4 × 0.9 capacity Third year - 1.0 × 0.9 capacity Income Tax = 0.37 × Pretax Earnings After-tax Earnings = Pretax Earnings – Income Tax = 0.63 × Pretax Earnings For ROI
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PRODUCT and PROCESS DESIGN LECTURE 07
Warren D. Seider, University of Pennsylvania 1
Profitability Analysis
Warren D. SeiderUniversity of PennsylvaniaPhiladelphia, Pennsylvania
Holger NickischConsultant
Profitability Analysis 2
Approximate Measures of Economic Goodness
TCICtax)-or After(Pretax Earnings Annual (ROI) Investment on Return =
WCTPI C C +
C - S
Cost Production Total
Usually
Assume 330 days of operation –330/365 = 0.9041 = operating factor
Project productionFirst year - 1/2 × 0.9 capacitySecond year - 3/4 × 0.9 capacityThird year - 1.0 × 0.9 capacity
CTDC = $90MM, installed over three years (1997-1999)
CWC = $40MM
At 90% of capacity (3rd yr and later)
S = $150MM/yr (1st yr = $75MM, 2nd yr = $113MM)
CExcl. Dep = $100MM/yr (1st yr = $55MM, 2nd yr = $78MM)
Profitability Analysis 10
PRODUCT and PROCESS DESIGN LECTURE 07
Warren D. Seider, University of Pennsylvania 6
Profitability Analysis 11
Profitability Analysis 12
Profitability Analysis-1.1.xls by Holger NickischSee Section 17.8 (SSL, 2004)
Aligned with specifications and format of Chapters 16and 17 in SSL, 2004.
Extensive Visual BASIC (VBA) programming is used to reduce most common sources of error whensetting up a complicated spreadsheet in EXCEL. Datais entered in dialog boxes and output is formatted on presentable pages. The user need not know VBA.
Login dialog box – enter user name - ‘student’password - ‘engineer’