Solar-Powered Camping Tent Financial Analysis

The assignment content discusses a solar-powered camping tent designed by Kaleidoscope and Orange Company for the Glastonbury festival. The paper analyzes two scenarios: one with an increase in inflation rate from 2.5% to 3%, and another with a 10% increase in sales volume. The financial planning model is used to analyze the impact of these changes on the company's profitability, including changes in selling price, fixed and variable costs, tax rates, and net profits. The paper also discusses a spreadsheet simulation model using Monte Carlo simulation to determine the probability of demand.

A Solar-Powered Camping Tent

Executive Summary
In this paper business data analysis is done in which the financial planning model is prepared to
analyze the impact of change in planned sales volume and price of the product.

Introduction
In this present paper, we will discuss the solar powers tents which are designed by the
Kaleidoscope and Orange Company for celebrating the Glastonbury festival. The objective of the
paper is to analyze the different scenarios in which the rate of inflation and level of sales changes
which impacts the profitability of the company. In the methodology section the financial
planning model is discussed and two scenarios. The general development of the spreadsheet
simulation model is analyzed and on the basis of which recommendations has been made.
The solar powered tents are also called as concept tents. These tents have a capability of
absorbing the light of sun directly due to which it is revolutionary in nature. The other features of
tent include installation of central wireless control hub which helps to control the energy
generated and utilize. The price of a tent is fixed according to the estimated cost of a tent. The
financial planning model is required to identify the impact of change in sales and inflation rate.
Methodology
Task 1: Financial planning Model
Deman
d
Selling
price
Fixed
cost Variable cost Rate of
tax Rate of inflation
Sales
T
co
Raw
material Packaging
Direct
labor Distribution
2000 65 10,000 8 2 5 3 20% - 130000
2200 67 10,000 8 2 5 3 20% 3% 147400
2420 69 10,000 8 2 5 3 20% 5% 166980
2662 71 10,000 8 2 5 3 20% 6% 189002
In the financial planning model the net profit is changed in planned sales volume and change in
price. In the first year the sale price is 65 and the sales volume is 130,000 so the net profit is
95,986. In second year the selling price is increased by 2 so the new price is 67 and the total sales
volume is 147,400. So, the net profit is increased by 51,414. The sales price in third year is 69
which are increased by 2 and the sales volume is 166,980 then net profits are 125,570. The net
profit from second to third year is increased by 15,664. The sales price in fourth year is 71 which
are increased by 2 then the sales volume is 189,002 and the net profit is 143,187. The net profit is
increased by 17,618. It shows the change in sales price and sales volume impacts the newt
volume in four years.

Financial planning
Scenario
1. Increase in inflation by 2.5% in 2nd year and 3% thereafter
In case of increase in the rate of inflation, the price also increases which increases the
money supply in an economy and purchase power of buyer also increases. Similarly, the
cost of labor and raw material increases with the increase in rate of inflation from 2.5% to
3%. The cost of variable also increases due to which the profit margin decreases. For
example the cost of inflation increase from 2.5% to 3% due to which the cost increases
from 20 pounds to 20.6 for selling 20 units of selling price per piece 40 pound to 40.6.
Then the net profit decreases from 30 pound to 20.60. Thus the profit of the company
decreases by 9.4pounds from the increase in inflation rate.
2. 10% increase in sales
The increase in sales units by 3% will impact the net profit after tax of the company. The
sales price increased by 10%. Following table shows the calculation:
Year
Demand Selling
price
Fixed
cost Variable cost Rate of
tax Rate of infl
Raw
material
Packagin
g
Direct
labor
Distributio
n
1 2000 65 10,000 8 2 5 3 20% -
2 2260 71.5 10,000 8 2 5 3 20%
3 2553.8 78.65 10,000 8 2 5 3 20%
4
2885.79
4 86.515 10,000 8 2 5 3 20%
The net profit of the company is increased due to increase in the selling price by 10%. The net
profit in first year is 95986 and in second year the net profit is 121,258 which are increased by
11,352 from the previous net profit. The net profits in third year are 152,671 which is increased
by 27,101. The net profit in fourth year is 191,717 which are increased by 48,530. Though
increase in the tax amount the net profit is increased from the increase in sales price.

Task: 2 Spreadsheet simulation model
The simulation model is defined as the model which is used to determine the performance of the
model in real world. The modeling helps to determine the flow of fluid and pattern of
transforming the heat. It helps in engineers and designers for understanding the conditions of the
project. The model is used in optimizing geometry for strength and weight, in choosing the
material according to the budget, strength and weight, predicting the loading condition, examines
the conditions of extreme environment, verification of hand calculations and validating the
survival and safety of physical prototype. The simulation is based on Monte Carlo simulation.
The spreadsheet simulation helps in determining the probability in a more accurate manner. The
simulation is applied through using excel. Following table shows the calculation of demand:
Deman
d
Probabilit
y
10,000 0.10
20,000 0.35
40,000 0.30
60,000 0.25
The simulation has been rune on excel sheet which shows 1,000 iterations in the following table:
Cutoffs Demand
0 10000
0.1 20000
0.45 40000
0.75 60000
Fraction of time
10000 0.106
20000 0.334
40000 0.301
60000 0.258
From the above simulation the best result is 0.334 with 20,000. The worst result is 0.106 with
10,000. It is identified that the expected demand of the company is 20,000.
Conclusion

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References