Financial Analysis of Customization Services
Added on 2020-03-16
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qwertyuiopasdfghjklzxcvbnmqwertyuiopasdfghjklzxcvbnmqwertyuiopasdfghjklzxcvbnmqwertyuiopasdfghjklzxcvbnmqwertyuiopasdfghjklzxcvbnmqwertyuiopasdfghjklzxcvbnmqwertyuiopasdfghjklzxcvbnmqwertyuiopasdfghjklzxcvbnmqwertyuiopasdfghjklzxcvbnmqwertyuiopasdfghjklzxcvbnmqwertyuiopasdfghjklzxcvbnmqwertyuiopasdfghjklzxcvbnmqwertyuiopasdfghjklzxcvbnmqwertyuiopasdfghjklzxcvbnmqwertyuiopasdfghjklzxcvbnmqwertyuiopasdfghjklzxcvbnmqwertyuiopasdfghjklzxcvbnmqwertyuiopasdfghjklzxcvbnmrtyuiopasdfghjklzxcvbnmqwertyuiopasdfghjklzxcvbnmqwertyuiopasdfghjklzxcvbnmqwertyuiopasdfghjklzxcvbnmqwA Financial Analysis Report for For-U JeansProject: Customization Lab[Pick the date]tABC
Contents1.Project Back ground............................................................................................................................42.Assumptions Made for Financial Analysis..........................................................................................53.Preliminary Risk Analysis...................................................................................................................6a)Supply Chain Risks: (Martino, Fera, RafaeleIannone, & Miranda, 2017).......................................7a)1) Demand Risk: (Martino, Fera, RafaeleIannone, & Miranda, 2017).........................................7a)2) Supply risks.............................................................................................................................7a)3) Process Risk..........................................................................................................................8a) 4) Control Risks...............................................................................................................................9b)Financial Risks................................................................................................................................9c)Marketing Risks.............................................................................................................................10d)Exogenous Risks........................................................................................................................104.Cash Flows Over the Life of the Project............................................................................................115 Financial Analysis.................................................................................................................................125.1 Costs of Goods Sold........................................................................................................................125.2 Profits and Profits After Tax............................................................................................................135.3 Annual Rate of Return (ARR).........................................................................................................145.4 Net Present Value............................................................................................................................145.5 Internal Rate of Return....................................................................................................................146 Sensitivity Analysis...............................................................................................................................156.1 Calculations For Sensitivity Analysis..............................................................................................16a) Analysis for Freedom Jeans as a complimentary Good to the customization................................16b)Customization Services are Priced Differently................................................................................177Other Considerations For Analysis: Business Sustainability............................................................198Decision Analysis..............................................................................................................................209 Recommendations for Financial Sustainability.......................................................................................21Bibliography...............................................................................................................................................21
Executive SummaryThis project report is a financial analysis for the Customization Lab for Jeans Project pitched at the For- U Company. Managers of the firm wish to establish a Customization Lan. The Project Report Analyses the proposed investment from a variety of financial parameters such as profits, rates of return etc. The report provides some recommendations too.
1.Project Back groundFor-U Jeans is looking to target the increasing base of young customers who seek adventurous, fun clothes that they can identify with. The product department and the marketing department have come up with an idea to include customize the jeans that are sold, in order to make the jeansmore personal and unique for their customers. It is hoped that once customers like the idea of customizing jeans, they would develop some brand loyalty and the idea of customization would hopefully lead them to purchase more jeans.This report is a financial report on the case. A Financial Report helps understand the total investment required during the life of a project, the total direct and direct costs associated with it and the total income that may be accrued over the life of the project. A financial case report gives an insight into the possibility of profits or losses that may be expected from a project so that managers can make better decisions. The Financial case project also contains the various alternatives available to managers to helps them make the right decisions. This report provides a brief analysis of the total costs associated with the project over the life of the project. The report also lists the various sources of revenue over the life of the project and the expected revenues from each of these sources. [ CITATION Pub01 \l 1033 ]Additionally, the report also provides an analysis of the financial possibilities on some key parameters like payback period, Net Present value, Internal Rate of Return and more.[ CITATION Pub01 \l 1033 ] Hopefully, managers will be able to use this report as a guide to making financial decisions regarding investment in the project. The Customization Lab has very high investment costs and it is important to understand the future cash flows (and discounted cash flows) are worth the heavy investment made in the present year.The purpose of this appraisal is to evaluate whether the Customization Lab would be a good investment and add value to the line of products that For- U Jeans has on offer. The Customization Lab is being proposed as completely a digital venture. Customers will be able to select from various options online to personalize their jeans. Some of these customizations
include a range of finishing touches such as scrape wash, blast wash, faded, rugged wash and scuffed. Once customers choose their favorite pair of jeans from the products on offer by For-U, they will able to customize it by selecting from a range of customizations. The Lab will exclusively focus on online sales at the moment. There will be no plans to introduce the custom labs in brick and mortar shops or other retail avenues. The value of this lab may include monetary and non-monetary benefits. Customization of Jeans will be a unique way to connect with new customers and offer variety to existing customers. It is expected that the new service onoffer will help build some customer loyalty towards the brand by helping to portray the brand as fun, relatable brand. Additionally, it is hoped that sales of jeans offered by For-U Jeans currently will pick up due to the new services To complement this new line, the product department has also thought of introducing a new cost-effective line of jeans for consumers. It is hoped that the as customers visit the customization Lab, they will have an additional option of purchasing Freesom Jeans. The total cost of introducing this new line is $100,000. This will be a limited edition line called “Freedom” with only 2000 jeans for sale, each pair of jeans to be sold at $75. It is hoped that the jeans would be sold out within the first six months of the date of sale. The new line, even if the custom lab is notapproved could still be an independent option to add to the existing line of products. The brand will not spend on advertisement or promotion of this new line, given that it is a cost effective andlimited edition collection available only online. It is being introduced simply to attract new customers and provide some variety in price to the existing customers.2.Assumptions Made for Financial AnalysisThe expected demand has been projected based on market survey. This survey was done considering specifically targeting the demographic of 16- 32 years old male and female residents all over Australia. The survey showed that there is indeed a market for customized jeans. While making demand projections, consumer taste and preferences have been assumed to be constant.The charges for shipping the product to the consumer have been excluded as shipping charges will be counted at actual.
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