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Polymold Division Strategy Paper

In: Business and Management

Submitted By nelomaher
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Polymold Division The Polymold Division case is answering whether or not the CAD/CAM is a good investment. We are looking to answer how it benefits the company, financially. Mr. Martin, the Polymold Division manager felt that sales would continue to decline if Polymold did not invest in the new computer-aided designing and manufacturing system and it would lose market share on its remaining products to its more technologically advanced computers. Mr. Martin feared the marketplace. Polymold manufactured high-quality precision molds with interchangeable parts. When forecasting Polymold Division’s financial statements there are some assumptions that need to be taken into account before projecting the numbers. One of the assumptions is that the 5.1% market share would drop to 4.2% if the company does not purchase the CAD/CAM investment. If they do purchase the CAD/CAM, sales would increase to 7.3%, but could vary from 6.3-7.7%. We are assuming a 50% tax rate, the rate that Mr. Martin for his projections. The last assumption states that you will assume that cost of goods sold will be 73% of sales and will increase up to 77% by 1988. With these assumptions, we can then analyze one really important piece of information that was given, sales. The financial statements are dependent on sales and growth. Exhibit 3 illustrates Polymold’s sales in 1982 ($10.8 million) as well as a forecast of sales and average growth rate from 1983-1987. This information allows you to create a projected income statement (for 1983-1987) – To solve: forecasted sales less cost of goods sold less expenses (selling general and administrative, depreciation, other), which would give you the pretax earnings. To solve for the earnings each year-end take the pretax earnings and subtract it by 1 less the assumed tax rate of 50. This is the approach we would take to demonstrate the income statement…...

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