Original Calculations - as shown in reports

Historic demand
Current batch size 3,000 Kg. Year Kg.
Demand 2,345 Kg. / year 2000 2,378
Material Cost 5% p. a. 2001 2,256
Financial Cost 12% p. a. 2002 2,352
2003 2,306
Cost breakdown CHF / Kg. % 2004 2,451
Main Raw Material 1 1,171 52% 2005 2,259
Overhead 712 32% 2006 2,361
Main Raw Material 2 298 13% 2007 2,384
Others (solvents, packing, etc.) 73 3% 2008 2,398
Total 2,254 2009 2,305
Total without overhead 1,542 CHF / Kg.

Set-up cost breakdown CHF

Facilities depreciation 689,523 91%
Cleaning Raw Materials 65,826 9%
Set-up Raw Materials 21,086 3%
Total 755,349
Total without depreciation 86,912 CHF

Economic Order Quantity 3,041 Kg.

Cash Flow Discounting (NPV Method) Orders / year Ordering cost (CHF / year) Holding cost (CHF / year) Total cost (CHF / year)
Current batch size 3,000 Kg. 0.782 67,936 393,210 461,146
Proposed batch size 453 Kg. 5.180 450,229 59,332 509,561

Expected incremental cash flows

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Ordering Cost -382,293 -382,293 -382,293 -382,293 -382,293 -382,293 -382,293 -382,293 -382,293 -382,293
Holding Cost 333,878 333,878 333,878 333,878 333,878 333,878 333,878 333,878 333,878 333,878
Incremental Inventory 1,963,985 1,963,985 1,963,985 1,963,985 1,963,985 1,963,985 1,963,985 1,963,985 1,963,985 1,963,985 1,963,985
Total 1,963,985 1,915,570 1,915,570 1,915,570 1,915,570 1,915,570 1,915,570 1,915,570 1,915,570 1,915,570 1,915,570

NPV 12,787,384 (This NPV value is based on a 10 year horizon. Only the perpetuity value should be used to compare to EOQ and EVA)

NPV (annuity) 17,927,071 CHF (This is the NPV to be maximized)

EVA Analysis Orders / year Ordering cost (CHF / year) Holding cost (CHF / year) Total cost (CHF / year)
Current batch size 3,000 Kg. 0.782 67,936 393,210 461,146
Proposed batch size 955 Kg. 2.456 213,470 125,138 338,608

EVA analysis
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Incremental WCR -1,576,895 -1,576,895 -1,576,895 -1,576,895 -1,576,895 -1,576,895 -1,576,895 -1,576,895 -1,576,895 -1,576,895 -1,576,895

Incr WCR @ WACC -189,227 -189,227 -189,227 -189,227 -189,227 -189,227 -189,227 -189,227 -189,227 -189,227
Ordering Cost -145,534 -145,534 -145,534 -145,534 -145,534 -145,534 -145,534 -145,534 -145,534 -145,534
Holding Cost 268,072 268,072 268,072 268,072 268,072 268,072 268,072 268,072 268,072 268,072

EVA 311,766 311,766 311,766 311,766 311,766 311,766 311,766 311,766 311,766 311,766

MVA 1,761,545 (This MVA value is based on a 10 year horizon. Only the perpetuity value should be used to compare to EOQ and NPV)

MVA (annuity) 2,598,047 CHF (This is the MVA value to be maximized)

EOQ Analysis q* TRC

Original 3,000 759,481 (TRC estimated with parameters c and K as defined by Andreu)
Updated 3,041 753,886
Annual Savings (CHF) 5,596

Decrease in inventory -31,300

Lifetime value (perpetuity + year 0 savings) 15,330