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ADMS 2600 Lecture Notes - Lecture 8: Enterprise Products, Modular Programming, Cash Flow

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magentaworm487
16 Feb 2018
School
York University
Department
Administrative Studies
Course
ADMS 2600
Professor
Amanda Shantz

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Document Summary

Dell computer, with close supplier relationships, encourages suppliers to focus on their individual technological capabilities to sustain leadership in their components. Research and development costs are too high and technological changes are too rapid for any one company to sustain leadership in every component. Suppliers are also pressed to drive down lead times, lot sizes, and inventories. Dell, in turn, keeps its research customer-focused and leverages that research to help itself and suppliers. Dell also constructs special web pages for suppliers, allowing them to view orders for components they produce as well as current levels of inventory at. This allows suppliers to plan based on actual end customer demand; as a result, it reduces the bullwhip effect. The intent is to work with suppliers to keep the supply chain moving rapidly, products current, and the customer order queue short. Then, with supplier collaboration, dell can offer the latest options, can build-to-order, and can achieve rapid throughput.

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Related Questions

Can anyone please help with the following Mini Case - specifically # 1,2&3? MNI CASE: STOCK VALUATION AT RAGAN ENGINES Larissa has been talking with the company’s directors about the future of East Coast Yachts. To this point, the company has used outside suppliers for various key components of the company’s yachts, including engines. Larissa has decided that East Coast Yachts should consider the purchase of an engine manufacturer to allow East Coast Yachts to better integrate its supply chain and get more control over engine features. After investigating several possible companies, Larissa feels that the purchase of Ragan Engines, Inc., is a possibility. She has asked Dan Ervin to analyze Ragan’s value. Ragan Engines, Inc., was founded nine years ago by a brother and sister—Carrington and Genevieve Ragan—and has remained a privately owned company. The company manufactures marine engines for a variety of applications. Ragan has experienced rapid growth because of a proprietary technology that increases the fuel efficiency of its engines with very little sacrifice in performance. The company is equally owned by Carrington and Genevieve. The original agreement between the siblings gave each 150,000 shares of stock. Larissa has asked Dan to determine a value per share of Ragan stock. To accomplish this, Dan has gathered the following information about some of Ragan’s competitors that are publicly traded: Nautilus Marine Engines’s negative earnings per share (EPS) were the result of an accounting write-off last year. Without the write-off, EPS for the company would have been $2.07. Last year, Ragan had an EPS of $5.35 and paid a dividend to Carrington and Genevieve of $320,000 each. The company also had a return on equity of 21 percent. Larissa tells Dan that a required return for Ragan of 18 percent is appropriate. 1. Assuming the company continues its current growth rate, what is the value per share of the company’s stock? 2. Dan has examined the company’s financial statements, as well as examining those of its competitors. Although Ragan currently has a technological advantage, Dan’s research indicates that Ragan’s competitors are investigating other methods to improve efficiency. Given this, Dan believes that Ragan’s technological advantage will last only for the next five years. After that period, the company’s growth will likely slow to the industry average. Additionally, Dan believes that the required return the company uses is too high. He believes the industry average required return is more appropriate. Under Dan’s assumptions, what is the estimated stock price? 3. What is the industry average price–earnings ratio? What is Ragan’s price–earnings ratio? Comment on any differences and explain why they may exist.