PROJECT DESCRIPTION

Add a heavy duty line of aftermarket suspension airbags, to supplement the standard product line. The heavy duty option will include a 20 percent
increase in wall thickness and a threaded valve connection, compared to the current slip-fit connection.

BUSINESS NEED
Market tests showed that 14% of consumers would step up to the premium bags, when offered at a $20 markup. Total product cost will increase
$2.20, creating a $17.80 gross margin increase per heavy-duty unit.

OWNERSHIP & APPROVAL

Project Manager Mike Cote Project Champion Brian Frizzel Approval Date Pending
Project Number AB-08

FINANCIALS & MILESTONES

Financials Capital/Expense Milestones (Schedule)
Goal Actual Goal Actual Goal Actual
Initial Investment $ 214,500 Capital approved 15-Feb
$ 180,000
Net Present Value (5 yr) $ 276,519 Tooling for new bags (capital) Tooling complete 1-May
ROI 98% Engineering materials for trials $ 20,000 Testing complete 1-Jul
IRR 50% Marketing promotions $ 14,500 SKU launch 15-Sep

RESOURCES & RISKS

Internal Resouces External Services Project Risks
Total Hours Peak Hrs/Wk Budget Actual Medium High
John Smith (Design) 90 40 Pro Tooling of San Diego $ 180,000 Installation difficulty ü
Mike Gorman (Design) 10 2 Marketing Services $ 14,500
David Stone (Mkt Comm.) 15 2
Louis Clemens (A.M.E.) 5 2
Alan Carr (Sourcing) 20 8
Financial Benefits and Costs
Note - review with your finance team to ensure accurate assumptions and calculations

Cost of Capital 8% (see finance team for updated value)

Initial Cost of Project $ 214,500

Cash Inflows Year 0 1 2

Incremental Margin $ $ 134,568 $ 139,552
Material Cost Savings
Labor Savings
Other Savings - Warranty $ 2,400 $ 2,400
Other
Cash Inflow $ 136,968 $ 141,952
Present Value of Cash Inflow $ 126,822 $ 121,701
Cumulative Cash Inflow $ 126,822 $ 248,523

Costs
Initial Investment $ 214,500
Incremental Material Cost $ 16,632 $ 16,632
Incremental Data Storage
Equipment Lease
Other
Cash Outflow $ 214,500 $ 16,632 $ 16,632
PV of Cash Outflow $ 214,500 $ 15,400 $ 14,259
Cumulative Cash Outflow $ 214,500 $ 229,900 $ 244,159

NPV of Project $ 276,519

Cash Flow by Year
IRR 50%
ROI 98% $150,000
$100,000
Year 0 1 2
Cash Flow $50,000$
$ (214,500) 120,336 $ 125,320
$0
0 1 2 3
-$50,000
-$100,000
-$150,000
-$200,000
-$250,000
-$150,000
-$200,000
-$250,000
 3 4 5
$ 144,536 $ 134,568 $ 134,568

$ 2,400 $ 2,400

$ 146,936 $ 136,968 $ 134,568

$ 116,643 $ 100,676 $ 91,585
$ 365,166 $ 465,841 $ 557,426

$ 16,632 $ 16,632 $ 16,632

$ 16,632 $ 16,632 $ 16,632

$ 13,203 $ 12,225 $ 11,319
$ 257,362 $ 269,587 $ 280,907

Cash Flow by Year

3 4 5
$ 130,304 $ 120,336 $ 117,936

1 2 3 4 5