For posterity
I am working on the first of four rounds for my final project. Each round, in addition to a crapload of other work, contains a series of 10 Board Queries, or questions regarding the industry, financial statements, etc.
Here is one question from the first round:
Investing $2,000,000 in TQM's Channel Support Systems initiative will at a minimum increase demand for your products 1.7% in this and in all future rounds. (Refer to the TQM Initiative worksheet in the CompXM.xls Decisions menu.) Looking at the Round 0 Inquirer for Andrews, last year's sales were $162,769,074. Assuming similar sales next year, the 1.7% increase in demand will provide $2,767,074 of additional revenue. With the overall contribution margin of 33.6%, after direct costs this revenue will add $929,737 to the bottom line. For simplicity, assume that the demand increase and margins will remain at last year's levels. How long will it take to achieve payback on the initial $2,000,000 TQM investment, rounded to the nearest month?
I wanted to post it here so some day I can look back and laugh. I am not laughing today.
Here is one question from the first round:
Investing $2,000,000 in TQM's Channel Support Systems initiative will at a minimum increase demand for your products 1.7% in this and in all future rounds. (Refer to the TQM Initiative worksheet in the CompXM.xls Decisions menu.) Looking at the Round 0 Inquirer for Andrews, last year's sales were $162,769,074. Assuming similar sales next year, the 1.7% increase in demand will provide $2,767,074 of additional revenue. With the overall contribution margin of 33.6%, after direct costs this revenue will add $929,737 to the bottom line. For simplicity, assume that the demand increase and margins will remain at last year's levels. How long will it take to achieve payback on the initial $2,000,000 TQM investment, rounded to the nearest month?
I wanted to post it here so some day I can look back and laugh. I am not laughing today.
posted by Amy at 9:44 PM
6 Comments:
do you know the answer for this question?
As a matter of fact, I do.
Can you show me some hints to solve this question?
Sure. Use the given increase in demand (1.7%) to calculate your demand year over year (remember it's compounded). Then use the given contribution margin (33.6%) to calculate your revenue put towards the bottom line for each year. Keep adding it up until you've covered your initial TQM investment costs. This should give you enough to go on. You can roughly break it down monthly from there. Does that help?
How about just the answer????
I have a similar question and still don't understand how you worked out with what you posted. can you explain further or show work using your numbers
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