The CFO of Flash Memory, Inc. prepares the company's investing and financing plans for the next three years. Flash Memory is a small firm that specializes in the design and manufacture of solid state drives (SSDs) and memory modules for the computer and electronics industries. The company invests aggressively in research and development of new products to stay ahead of the competition. Increased working capital requirements force the CFO to consider alternatives for additional financing. In addition, he must also consider an investment opportunity in a new product line that has the potential to be extremely profitable. Students must prepare financial forecasts, calculate the weighted average cost of capital (WACC), estimate cash flows, and evaluate financing alternatives. This case is especially recommended as a final exam case for a standard MBA-level course in corporate finance. Subjects Include: Capital Budgeting, Cash Flows, Financial Forecasting, Long Term Financing, Net Present Value (NPV), and Weighted Average Cost of Capital (WACC)
For the Flash Memory Inc. case you will turn in both a write-up of your analysis and a spreadsheet that contains any financials or calculations you performed. The formal write-up should contain an overview of how you tackled specific issues presented in the case, how you set up the spreadsheet to present you analysis, and a discussion of any assumptions you are making. To guide you through the case, below are a set of questions you will need to address. Structure your written analysis and spreadsheet solutions around these questions. 1.Assuming the company does not invest in the new product line prepare forecasted income statements and balance sheets at year-end 2010, 2011, and 2012. Based on these forecasts, estimate Flash’s required external financing. Assume any external financing takes the form of additional notes payable from its commercial bank. Can Flash fund the continued growth and meet the borrowing requirements...
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