Flash Memory Inc. Case Study Spreadsheet

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1. Background of Flash Memory. Inc
Flash memory was founded in San Jose, California in the late 1990s. In 2010, there are six individuals held the top management positions, comprised the board of directors, and owned the entire equity in the firm.Flash specialized in the design and manufacture of solid state drives (SSDs)and memory modules which comprised the fastest growing segment in the overall memory industry.
SSDS market is huge and intensely competitive which reflects in product offerings, high rivalry, and low profit margins as a percent of sales. Flash’s competitions include
Intel, Samsung, Micron Technology, etc. Due to theproducts ‘characteristic and stiff competitors, its sales life cycle is short, usually only six years. In…show more content…

Another index of market value analysis is Book Value per Share. It increases since
2007 and will reach $23.6 at 2014. If we compare this book value with the current market price of $25, there is only litter difference between the two index and we may say the stock appears to be right price.

3.2.

The Analysis of The New Project
This new project can use two ways to raise its capital, one is to borrow money from

bank but it will increases the bank’s limitation with a higher interest rate 9.25% and another is issuing new common stocks (Flash could issue up to 300,000 shares of new common stock to a large institutional investor at a price of $25 per share), or combined these two ways.
I used the combined one, 50% capital from bonds and 50% capital from loan. The interest rate of bond using 4.72% (Bonding Ratio is A). I have two reasons to choose this level interest rate: one is company can pay less debt and increase the net income; another is the amount of raised funding is not very large, so there must be people want to buy a safety stocks even with not very high interest rate. So Id = 5.8% (Please see the
Table4).
To this project, the all capital will use from debt. Because as the report says, company develops very fast these years and already reached the limitation of bank, so I think company has no enough equity to support this new project.
Thus, the MARR = Id + risk (6%) = 11.8%. The NPW of this new project is $1,416,000 and IRR is 20%. So, the new

 

Flash Memory, Inc.Exhibit 1 Actual and Forecasted Financial Statements Assuming No Investment in New roduct !ine, No Sale o" New#ommon Stoc$, and All %orrowings at &.'()Income Statement *+s exce-t ESActualForecast'/'0'&'1'11'1'

Sales$77,131$80,953$89,250$120,000$144,000$144,000$128,000- YOY growth5.0%10.2%34.5%20.0%0.0%-11.1%Cost of goods sold$2,519$8,382$72,424$97,320$11,784$11,784- % of sales81.1%84.5%81.1%81.1%81.1%81.1%!ross "arg#$14,12$12,571$1,82$22,80$27,21$27,21esear&h ad de'elo("et$3,72$4,133$4,41$,000$7,200$7,200- % of sales4.8%5.1%4.9%5.0%5.0%5.0%Sell#g, geeral ad ad"##strat#'e$,594$7,53$7,458$10,032$12,038$12,038- % of sales8.5%9.3%8.4%8.4%8.4%8.4%O(erat#g #&o"e$4,292$902$4,952$,48$7,978$7,978)terest e*(ese$480$52$735$937$1,323$1,55 - )terest rate %9.25%9.25%9.25%Other #&o"e +e*(eses-$39-$27-$35-$50-$50-$50)&o"e efore #&o"e ta*es$3,773$223$4,182$5,1$,04$,33)&o"e ta*es$1,509$89$1,73$2,24$2,42$2,545- % of #&o"e efore ta*es40.0%39.9%40.0%et #&o"e$2,24$134$2,509$3,39$3,93$3,818/ar#gs (er share$1.52$0.09$1.8$2.28$2.$2.5

Exhibit 1 *continued%alance Sheet *+s exce-t shares outstanding and boo$ value -er shareActualForecast'/'0'&'1'11'1'

Cash$2,53$2,218$2,934$3,90$4,752$4,752- % of sales3.3%2.7%3.3%3.3%3.3%3.3% &&ots re&e#'ale$10,988$12,84$14,71$19,72$23,71$23,71- as of sales333337000)'etor#es$9,592$11,072$11,509$13,85$1,38$1,38- as of CO!S55958525252re(a#d e*(eses$309$324$357$480$57$57- % of sales0.3%0.2%0.2%0.4%0.4%0.4%otal &rret assets$23,425$2,478$29,471$38,031$45,37$45,37ro(ert, (lat 6 e#("et at &ost$5,30$,11$7,282$8,182$9,082$9,982

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