Business Case Studies 2 - Assessment of the suggested alternatives

This document provides a financial and non-financial assessment of the two suggested alternatives accessible by DuoLever Ltd. The alternatives are incorporation of development of reused sachet plastic to its portfolio of brands or authorisation of utilisation of copyright processes.

Running head: BUSINESS CASE STUDIES 2
Business Case Studies 2
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BUSINESS CASE STUDIES 2
Table of Contents
Spreadsheet financial assessment of the planned alternatives:..................................................2
Memo:........................................................................................................................................2
References:.................................................................................................................................7

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Spreadsheet financial assessment of the planned alternatives:
Memo:
Memorandum
To: The CEO of DuoLever Ltd
From: The Manager
Dated: 18-05-2019

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Sub: Assessment of the suggested alternatives
The memorandum is portrayed with an aim to give a significant acumen of the "two"
suggested alternatives, that are accessible to the authorities of "DuoLever Ltd". It is because
the business is in an impasse of whether to incorporate development of reused "sachet
plastic" to its "portfolio" of brands or should it authorise utilisation of copyright processes.
Thus, both "financial" and "non-financial" forms have been taken into account for assessing
the "two" suggested alternatives accessible by the business.
Definition and rationale of the selected processes:
The systems selected to evaluate usefulness of the "two" alternatives incorporate
yearly monetary flows and "net present value (NPV)". If a company has sufficient "profit" on
"paper", it would not aid in retaining workers functioning or dealers supplying substances
while they might not be repaid on time (Adusumilli, Davis and Fromme 2016). Furthermore,
an inefficiency to complete orders would cause hearsay regarding the company and the
buyers would think of searching a new dealer. Therefore, monetary flows are necessary in the
form of venturing into noteworthy "investment decisions" (Basher and Raboy 2018). "NPV"
is selected since, it takes into consideration the "time value of money". Besides, both
previous and succeeding "cash flows" are appraised over the "project" life span, when giving
importance to "profitability" and "risk". Lastly, it aids in increasing the worth of the business
(Bell 2017).
Inputs and hypothesis constructed:
With respect to the first alternative, that is to incorporate development of reused
"sachet plastic", it is pointed out that "DuoLever Ltd" has to "invest" "$20 million" for
acquiring "plant and equipment" supposed to have a projected life span of "five" years with

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no remnant "value" after the accomplishment of the project. The hypothesis made in this
respect involves raise in "sales revenue" by "4%" from the "second year" and it would be
boosted by extra "revenue" increase due to the advantages of reused wrapping. For funding
"plant and equipment", the business would take a "five-year" loan, which would be giving an
outcome of yearly interest expenditure of "$1.4 million" to be repaid at the end of every year.
However, owing to the reduced "energy" expenses by the usage of "environment-friendly"
substances, the all-inclusive varying wrapping prices currently projected "$22 million" would
get diminished by "15%" in the basic year of the "project". Besides there would be deduction
in "variable costs" by extra "15%" via eluding of a dealer limit, it is not treated, because the
same would be counter-balanced by the need of repaying a "partner". It would finally
contribute to the present predictions. "Depreciation" expenditure is subtracted from "revenue"
to achieve "profit after tax", after this it would be "added back" to calculate the yearly
monetary flows.
With respect to the "second alternative, there is no need of "investing" in "plant and
equipment", as it is associated to "licensed" utilisation of the "patented" process. As a result,
the business does not have to carry the load of basic "investment" at the initiation of the
"project" (Hopkinson 2017). Hence, "DuoLever Ltd" only has to experience the goods supply
expenses and yearly "generic", selling and management expenditures for this alternative.
Furthermore, there is no requirement for any extra generation management expense.
moreover, the company would be able to keep the anticipated advantages in "sales revenue"
as shown in terms of the "first alternative". In both the alternatives, the "WACC" and tax
amounts are evaluated at "8%" and "25%" respectively.
Summary of findings:

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The above charts mostly aid in presenting the yearly monetary flows and "net present
value" of the "two" alternatives. It could be cited that the "yearly cash flows" for the "first
alternative" are noticed to be lesser in comparison to the "yearly cash flows" for the "second
alternative". It is mostly owing to the Non-existence of "depreciation" expenditure, "finance
costs" and lesser yearly generics, selling and management costs in the "second alternative".
As the business does not have to acquire "plant and equipment", it the company selects the
"second alternative", there would be no cost regarding "depreciation" and "finance cost" via
publishing debt (Leyman and Vanhoucke 2017). By examining "NPV", it could be observed
that the "second alternative" has greater "NPV" summing up to "$608,003,202" in
comparison to the "NPV" of the "first alternative" summing up to "$589,011,380". A greater
and positive "NPV" is always enticing for a business, since it helps in growing the worth of
the company (Lee et al. 2016). Therefore, in forms of both "NPV" and "annual cash flow",
investment in the "second alternative" is considered to be viable.
Recommendations and follow-up measures:
With respect to "NPV" and monetary cash flows, both choices are suitable for
"investment" from the point of view of "DuoLever Ltd" due to positive worth. Moreover, if
only "one alternative" is to be chosen, the "second alternative" is more "profitable" in contrast
to the "first alternative" as it has greater "NPV" and "annual cash flows" (Thomas 2018).
Moreover, there are specific other operations, which are to be noted by the authorities of
"DuoLever Ltd" before taking the ultimate commitment.
"One" of the notable risks involved with the "investment" commitment with respect to
the choice of the "second alternative" is the quality of the goods to be utilised by "Clean
World Ltd". It is since, if the delivered substances are not of higher quality, there would be
reduction in anticipated advantages in "sales revenue". The consumers would be shifting to

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the other dealers for quality items and as an outcome, there would be fall in comprehensive
"profitability" to be gained from the "project". In order to deal with this risk, "DuoLever Ltd"
has to create special group, who are going to audit the delivered goods to "Clean world Ltd".
If the quality of the substances fails to meet the actual grade, precise actions should be taken
such as- investigating the "production" locations of "Clean World Ltd" for assuring
anticipated sales advantages and "profitability" to be gained from the "project" (Kravanja, et
al. 2018).

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References:
Adusumilli, N., Davis, S. and Fromme, D., 2016. Economic evaluation of using surge valves
in furrow irrigation of row crops in Louisiana: A net present value approach. Agricultural
Water Management, 174, pp.61-65.
Basher, S.A. and Raboy, D.G., 2018. The misuse of net present value in energy efficiency
standards. Renewable and Sustainable Energy Reviews, 96, pp.218-225.
Bell, P., 2017. Introducing the Net Present Value Profile.
Hopkinson, M., 2017. Net Present value and risk modelling for projects. Routledge.
Leyman, P. and Vanhoucke, M., 2017. Capital-and resource-constrained project scheduling
with net present value optimization. European Journal of Operational Research, 256(3),
pp.757-776.
Petković, D., Shamshirband, S., Kamsin, A., Lee, M., Anicic, O. and Nikolić, V., 2016.
RETRACTED: Survey of the most influential parameters on the wind farm net present value
(NPV) by adaptive neuro-fuzzy approach.
Sirinanda, K.G., Brazil, M., Grossman, P.A., Rubinstein, J.H. and Thomas, D.A., 2018.
Strategic underground mine access design to maximise the Net Present Value. In Advances in
Applied Strategic Mine Planning (pp. 607-624). Springer, Cham.
Zore, Ž., Čuček, L., Širovnik, D., Pintarič, Z.N. and Kravanja, Z., 2018. Maximizing the
sustainability net present value of renewable energy supply networks. Chemical Engineering
Research and Design, 131, pp.245-265.