Date: May 15, 2019

To: Eduardus Tandelilin

From: Sebastien Gautier/Riandy Oyadiwa/Fajri Septian/Alvian Tamba

Subject: Procter & Gamble Case

1. Case overview

Procter and Gamble is an American multinational consumer goods company based in downtown
Cincinnati (Ohio, US) and founded in 1837. In 2007, its total revenue exceeded $72 billion
coming from all over the World. P&G offers a wide range of personal care and healthcare,
hygiene products and household care including brands like Braun, Crest or Gillette.
Crest teeth whitening, a Procter and Gamble brand is considering the launch of an extension to
its Whitestrips product. Since its introduction on the Teeth whitening market in 2001, Crest
Whitestrips’ revenue remained constant (around $250 million) with no growth either in annual
sales or profit. After several failed attempts of a line extension, Jackson Christopher a financial
analyst for the P&G company’s North America Oral Care was asked to consider different cases
regarding the launch of the Whitestrips Advanced Seal. Jackson Christopher came up with 3
cases: a base case, a proposal to drive revenue and a proposal to minimize cannibalization.

For the 3 cases, we will convert all data into a realistic P&L, then calculate the Net Present Value
for each case, and at last, we will recommend which scenario is the best for P&G and its
investors.

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2. Our Analysis

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Note:
In the 3 cases above, corporate income tax expense has been computed using 5-year accelerated
depreciation expense.

We have assumed
 that inflation was nil so price of products and cost of good sold remained constant during
the 4-year period.
 the increase of units sold has no impact on the manufacturing capacity (no further
CAPEX required) but was triggered by the marketing expense level (which was reflected
in the 3 cases).

3. Conclusion

Summary of the 3 cases is as follows:

Base Case Drive Revenue Minimize Cannibalization

NPV Generated from $21,212,699 $38,100,607 $5,744,091
new products
NPV Loss from ($13,610,921) ($27,085,937) ($693,973)
Cannibalization
Total NPV $7,601,778 $11,014,670 $5,050,118

Based on the above, we recommend choosing the Cased No.2 (Drive Revenue) as it generates
the most value for shareholders (NPV).