Whirlpool Europe

Questions:

1. Compute the net present value of the project including all costs and benefits considered in the case. [Suggestion: start by elaborating one map for each wave, considering the impact of inventory reduction, additional unit sales and increased margins. Elaborate another map with cost savings, capital expenditures and implementation costs. Finally, present a summary map with the cash flows of this project.]

2. When valuing the proposed investment, what do you regard as an appropriate terminal value after 2007 for this project? Why? 3. Would you recommend the ERP investment? What is your major concern with the NPV analysis you just performed? Conduct sensitivity analysis with regard to a) The reduction in DSI. The firm is expecting to reduce 12 days of inventory, over half of the difference between its actual inventory and the theoretical model inventory. What if the estimation of the reduction in DSI is incorrect? b) The increase in product availability. The company’s targeted product availability was 92%. What if the ERP system does not manage to reach the goal of the company or outperform the target? c) The increase in margin. The expected margin increase was 0.25% by the second year. What if the estimation was imprecise? d) The salary level. What if all employees’ (including the hired consultants) salary level turns out to be higher than expected? e) Elaborate a scenario analysis considering your proposed worst cases for a), b) and c) simultaneously.

Written reports should be handed in at the main door, by 5 p.m. of Monday, 15th October. The cover page of the written report should include the following:

Name of the case

Name of the teacher

Name of the Class Names and numbers of all group members

All groups should be prepared for in-class presentation and discussion. .