Stryker Corporation: In-sourcing PCBs

Compute Capital Budgeting Decision Criteria. Discuss what they mean NPV: Cost of the current sourcing method has a NPV of $ -32. 67M over a period of 6 old ages ( 2004-2009 ) . Cost of the In-house fabrication method has a NPV of $ -31. 8M over a period of 6 old ages ( 2004-2009 ) . This means taking this undertaking has a positive NPV of $ 870. 000. Harmonizing to this analysis. fabricating in-house will work out to be cheaper.

IRR: 37. 9 % . holding such a high IRR signifies that there is good mistake border in the cost of capital.

In simple words. even if the cost of capital went up from 15 % to 37. 9 % . NPV will merely go 0. Therefore is the good investing compared to the current option. Payback Period: I calculated a payback period of 3. 11 old ages ( get downing at get downing of 2004 ) that means at 3. 11 old ages the undertaking will make its breakeven point and after this point it will get down generating net income.

This option should besides be preferred because this undertaking will enable Stryker to hold greater control over its production processes.

Having non being dependent on any outside beginnings for PCBs supply will salvage Stryker from unobserved and unwanted losingss. The fabricating units of PCBs can be adjusted harmonizing to the gross revenues and can be extremely flexible with the insource fabrication set up.