Question

Questions

1. Assume the following:

     • the sales price to consumers is $150

     • the retailers’ markup is 50%

     • Whirlpool’s after tax profit margin is 4%

     • The hurdle rate is 20%

     • Populations are as follows: Brazil 182 million, China 1.286 billion, and India 1.049 billion.

     • Family size are as follows: Brazil 4.01, China 3.70, and India 4.91.

     • Market penetration for each of the first two years is equal and sales increase by 10% per year for years 3, 4, and 5.

     •20,000 units were sold in the first year

     What is the expected 5-year net present value?

Answer 1

Sale price of whirlpool to retailer = 150 / 1.5 = $100

The expected 5-year net present value

	1	2	3	$4	$5
Units	20,000	20,000	22,000	24,200	26,620
Unit price	100	100	100	100	100
Sales revenue	$20,00,000	$20,00,000	$22,00,000	$24,20,000	$26,62,000
Net profit margin	$80,000	$80,000	$88,000	$96,800	$1,06,480
Hurdle rate	$0.833	$0.694	$0.579	$0.482	$0.402
PV of cash flows	$66,666.7	$55,555.6	$50,925.9	$46,682.1	$42,791.9
NPV	$2,62,622.2