Case ID: 202017
Solution ID: 22035
Words: 1658
Price $ 75

Whirlpool Europe Case Solution

Case Solution

This case is definitely a capital budgeting problem. Whirlpool Europe is evaluating a good investment within an enterprise resource planning (ERP) system that will reorganize the data flow throughout the organization. Students derive the money flows from capital, sales, along with other enhancements together with the price of an investment.

Excel Calculations

South Wave, Central Wave, North Wave

Income Statement for South Wave ( $000)

Forecast Without the ERP System

Impact of ERP Systems

Forecast With the ERP System

Calculation of Additional Units

Inventory Savings

 

All Wave Combined

Forecast Without the ERP System

Forecast With the ERP System

Incremental Pre tax Cash flows from ERP System

 

Capex and Dep

Capital Expenditure and Depreciation ( $000)

Incremental Operating Expenses

Other Savings

 

FCF and NPV Analysis

Free Cash Flows and NPV Analysis

IRR

Questions Covered

What is the business case for Whirlpool Europe undertaking this possible investment in the ERP system?

What are the sources of potential benefits of the system for Whirlpool?  Should they have the same degree of confidence in each of sources?

Why do you think they decided to start the system in with the West Wave first?

What the sources and timing of costs they expect to incur with the implementation of the system?   

Assume that the proposed system will be in use though 2007.  Given the cost of capital and tax rate in the case, what is the NPV of this system? 

If we relax the assumption that the system would be used though 2007, what cash flows should be included beyond this point?

Would you recommend that they go ahead with this capital investment?  Do you have any major concerns?  If so, how might these have been addressed in your analysis?