Detailed Financial StatementsCapital Investment Strategy
|No. of Production Lines||0||1||1||2||2|
|Prototype Molds (2)||120||0||120||120|
|48 Cavity Barrel Mold||200||10||200||200|
|48 Cavity Plunger Mold||180||10||180||180|
|48 Cavity Sheath Mold||200||10||200||200|
|Special Assembly Equip.||n/a||10||255||255|
All capital expenditures beyond the first two years will be financed through retained earnings. Zif plans to grow through the investment of retained earnings, thus no dividends are expected to be paid out in the first six years of operations. A friendly acquisition or an initial public offering will be made by year six to allow initial investors to divest from Zif.
In general, Zif will invest very conservatively to minimize risk and so as not to outgrow its resources or capacity to expand. Based on investor opinions, company resources, and realized profits, Zif may grow faster than outlined below through the acquisition of debt beyond the 10% debt to equity established in this plan.Equity Offering
|Equity Investment||Equity Share|
|Option #1 (License)||$400,000||20%|
|Option #2 (Manufacture)||$1,870,000||30%|
|Product Price ($)||0.18||0.16||0.14|
|NPV (mil $)15||1.7||1.3||0.94|
|ROE (5 yr avg.)||72%||71%||60%|
|Return on Initial Investment16||198%||191%||182%|
|5 Year Multiple of 20% Equity||61||49||37|
|Product Price ($)||0.18||0.16||0.14|
|Contracted Cost per unit ($)17||.067||.072||.08|
|Dist. Mark-up (% Sales)||15%||20%||25%|
|NPV (mil $)18||6.1||4.4||2.3|
|ROE (5 yr avg.)||38%||33%||23%|
|Debt/Equity (year 6)||0%||0%||0%|
|Return on Initial Investment19||186%||176%||160%|
|5 Year Multiple of 30% Equity||41||30||17|
Based on the scenarios above, all cases provide excellent financial results with minimal leverage.Risks
Patent Infringement / Litigation (15)% Several firms have patented safety syringe ideas, but none are identical or very close to the Zif design. Litigation based on prior art may cost the firm in terms of a licensing fee settlement which would hurt profitability, but most likely allow the firm remain profitable. Additionally, frivolous litigation may be initiated by a competitor as a means of predatory action. The cost of this litigation is unknown.
Manufacturing Failure (5%) Proven technology will be used to manufacture this product. The major risk involved here is in the combination of these technologies feeding one directly into the other without buffer zones. This may pose initial startup difficulties as machine outputs may suffer.
Poor Market Reaction (5%) Zif must market itself effectively and provide a sense of product quality, security and reliability. If the market is negatively effected by competitive "propaganda" or initial quality problems, Zif could quickly lose hold in the marketplace. This is a small risk because the large pent-up demand for safe syringes will encourage users to try new brands. Additionally, Zif will focus on initial and ongoing product quality as a way of doing business to ensured its products meet the strictest user requirements.
FDA Rejection (5%) Due to the safe nature of this product, tremendous market demand, existing manufacturing technology, and soon to be established field results, this risk is small.
Overall, the combined risk assessment is 35%. This risk can have an impact on the initial profitability, however, these setbacks, if realized, are expected to be minimized and eventually eliminated within the first five years of operation.
13 Does not include marketing expenses and salaries
14 See page 26 for Depreciation schedule
15 Calculated with a discount rate of 50%.
16 Compounded annual return of 20% equity stake. Based on industry average P/E Multiple of 20.
17 Variation based upon negotiated contract.
18 Calculated with a discount rate of 30%.
19 Compounded annual return of 30% equity stake. Based on industry average P/E Multiple of 20.
Detailed Financial Statements
|Zif Medical Devices|
|Table of Contents||Appendices|
0. Executive Summary|
1. Product Design
2. Market Analysis
3. Commercial Options
4. Marketing Strategy
5. Manufacturing Plan
7. Corporate Vision, Mission
8. Financial Plan
Focus Group Summaries
Patent Attorney's Opinion
FDA Consultant's Option
|© 1996 Zif Medical Devices. All rights reserved.|