List your original net income for years 1, 2, and 3. What would be the amount of your net income (in dollars) for years 1, 2, and 3 if you made the changes suggested in the table below?
finance
Description
Semester Project What-If Analyses Type Your Name
Here
RHPM 420, 30 points
1. List your original net
income for years 1, 2, and 3. What would be the amount of your net income (in
dollars) for years 1, 2, and 3 if you made the changes suggested in the table
below? Type the answers in the table.
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Change |
Y1 Net Inc. |
Y2 Net Inc. |
Y3 Net Inc. |
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a. |
Original net income for your project |
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b. |
Net income when raising prices by 10% |
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c. |
Net income when reducing prices by 10% |
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d. |
Net income when reducing expenses by 10% |
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2.
List your Year 2 original net profit to sales ratio (i.e., net
profit divided by total revenues). Then compute how much you would have to raise
prices (as a percentage) to have your net profit to sales ratio be 10%
higher in Year 2. Next, compute how much would you have to cut expenses
(as a percentage) to have a net profit on sales ratio (i.e., net profit divided
by total revenues) of 10% higher in year 2. Type your answers in the table.
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Change |
% Profit/Sales |
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a. |
Original net profit to sales ratio in Year 2 |
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b. |
Percentage increase or decrease in prices to have your
Year 2 net profit to sales ratio be 10% higher in Year 2 |
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c. |
Percentage increase or decrease in expenses to have your
Year 2 net profit to sales ratio be 10% higher in Year 2 |
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3. Show the original dollar
total of your Year 1 expenses and the dollar amount of 5% of your original
expense total. Then rank in order the expenses that you would cut if you were
forced to cut expenses by 5%? List the expense item and the amount of each
expense you would cut. Finally, show the total dollar amount you would cut. Remember,
you can’t cut expenses that would keep you from operating. (Tip: This is
easiest to do in an Excel table. Also, you may not need all seven expense lines
below.)
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Original Total Dollar Amount of Year 1 Expenses |
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Dollar Amount of 5% of Year 1 Expenses * |
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Expense Items to Be Cut in Rank Order |
Dollar Amount to Be Cut |
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a.
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b.
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c.
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d.
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e.
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f.
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g.
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Total Dollar Amount to Be Cut (not less than * above) |
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4. Raising prices is one way
of increasing your revenues. What is another specific action that you could
take to increase your revenues in your semester project business? To
earn credit, be as explicit as possible.
5. What do you think is your semester
project business’s most valuable asset? Why?
6. What are two things you
learned from your semester project?
a.
b.
