Financial Analysis on Stryker Corporation

This assignment refers to data in the Excel files: ‘stryker.xlsx’.

The data and assignment questions are based on the Stryker Corporation we discussed in class, so it should look familiar. Here are some assumptions you must use in answering the questions below:

Key Assumptions

1. The attached spreadsheet contains financial data for Stryker. It also contains a standard 5 year forecast. Use the forecast to inform your answers. Make changes to model as you deem appropriate. Use only the tab titled stryker model
2. Provide your answers in a word document. No more than two pages in total. You are free to use data from the xls in the form of an appendix. That doesn’t count against the two page.
3. In class on Tuesday, you will have 10 minutes each to take me through your answers. I will ask clarifying questions as to how you came to your answer. I will also ask follow on questions drawn from the material in the class. The expectation is that you are presenting your written and oral answers as if you were the CFO of Stryker, and I am the CEO looking for your best financial advice
4. Stryker sells medical devices, including PCB’s. It is evaluating whether it should insource the production of PCB’s. To insource, they would need to build a manufacturing facility, and sever ties with their suppliers. The current spreadsheet describes their base financial model if they continue their current strategy. Make sure you understand and describe this scenario fully
5. If Stryker decides to invoice, that will have multiple impacts on their financial situation. They would take a long term loan to build or buy a PCB factory. They can borrow money from a bank at 8%.
6. All items on the IS/BS are in 1,000s
7. If Stryker builds a PCB manufacturing plant, assume they can build it immediately. This is unrealistic, but will simplify the problem

Questions:

What is Strykers current financial situation. From an Income Statement and Balance Sheet point of view.

What are the pros and cons of the current plan vs. insourcing the production of PCBs

What are the key financial metrics you would look at to compare the current plan with the insourcing plan?

Insourcing will require several financial changes. What are those financial changes? And what are reasonable assumptions as to how much they will change?

Assuming it will cost $6Billion to build a new PCB factory, what are the financials of this plan, and how does it compare with the current outsourcing plan? How does your answer change if that changes to $1B, or $10B?