Jade Shampoo Case Study Solution
In addition to this, taking under consideration the information provided in the case; the company enjoys a competitive position in a highly competent and volatile market by offering high-quality Jade Shampoo to the customers. Furthermore, the company could produce 45750000 products with its present capability of meeting the market demand & to earn the profit returns. Moreover, the financial statement of the company shows that the company earns 16.47 million in profit before contribution and 9.882 million after-tax profits. Not only this, the company is having good cash flows, amounting to 9.882 million and it is earning the net present value of 21.486 million at the hurdle rate of 18 percent. This demonstrates the company’s ability to generate healthy profit returns by attracting new and potential customers. If the company fails to bring desirable changes in the style and features of the product; there is a likelihood that it would lose its customers and would be left behind in the industry because of the presence of tough market competitors.
Furthermore, the calculations after change procedure of new cap and completion of molding machine; the net present value has remained constant and the volume of the products has been increased to 45.750 million, but the company is still generating similar profit before tax consideration. Additionally, the core reason behind the similar net present value is 1 million of the initial cost of the project as well as the depreciation expenses, which in turn reduces the net present value.
Possible Decision Alternatives-
In the wake of the current situation being faced by the company; there are two possible decision alternates, which are as follows:
- The continued production with the old traditional bottle cap.
- And, the continuity of the production with the new dispenser bottle cap.
Evaluation of Alternatives – both qualitative and quantitative
The excel solver add-in is used for the automatic data simulation to find an optimal solution for selling units to maximize the profits and revenues of the company. Certain assumptions have been used for the process of simulation, such as: calculating the before tax contradiction per unit, after-tax profit, and the net present value per unit & thus making the final calculations for the project.
The calculations are performed in two scenarios, which provide valuable insights on whether to accept the project or not. In the first case, the calculation is made with the current facility and an optimal solution is found & the effect of accepting the project on the company’s profitability level is analyzed.
Accept the project - new dispenser bottle cap
Under this scenario, after changing the cap design and implementing the new project while investing a large amount of 1 million dollars in the initial investment to start the project, we found that the maximum capacity of the production was increased to 49.316 million from 45.750 million. Additionally, the company can generate 2.47 million profit per day which is far lesser than the present situation and if we move towards the profits we can see that they have also declined as they decrease to 121.666 million which is also lesser than the present profitability...............
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