Analyzing a case generally involves five steps
:1. Identify the problem;
2. Define the alternatives (options);
3. Gather information about the alternatives;
4. Analyze the relative merits of the options
;5. Make a decision and recommend a course of action
.A series of questions for each case is provided below to direct your attention and guide your analysis. I want you to address these questions, but not to feel constrained by them. There may be important issues not addressed by these questions that need to be identified in your analysis. You should also be guided by the preceding five steps in your thinking process, but do not follow them slavishly. Do not, for example, enumerate the steps in a paper or presentation.
Flash MemoryInc.
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: in this case all required external financing takes the form of additional notes payable from its commercial bank, for the same period.
2.What course of action do you recommend regarding the proposed investment in the new product line? Should the company accept or reject this investment opportunity?
3.How does your recommendation from question 2 above impact your estimate of the company’s forecasted income statements and balance sheets, and required external financing in 2010, 2011, and 2012? How do these forecasted income statements and balance sheets differ if the company relies solely on additional notes payable from its commercial bank, compared to a sale of new equity?
4.As CFO of Hathaway Browne, what financing alternative would you recommend to the board of directors to meet the financing needs you estimated in questions 1 through 3 above? What are the costs and benefits of each alternative?
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