Discounted Cash Flow Analysis In New Program Investment Decision Review

John Deere is the world leading agricultural machine manufacturer, and it has3tractor factories in China.3E tractor is one product of John Deere Tianjin factory. When China governmentplanned to implement the off-road machine’s engine emission stage3nationalstandard, John Deere reviewed and made decision of developing3E stage3tractor. Atthe beginning of the project, project team found the project’s Internal Return Rate, NetPresent Value were too low. With the analysis and adjustment of product cost,building product price Vs volume module, and optimization of tooling investment, weachieved company required IRR and NPV.In the first chapter, we made an overview of agricultural industry in China,common issue, Deere Company information, and the importance of our DCF analysis.In the second chapter, we introduce the definition and principle of DCF, and thecommon issue of our local company.In the third chapter, we introduced the project’s background, our first DCFcalculation result. Then we study the product portfolio, design solution, cost reductiontarget, to get an optimized product cost. We build the price Vs volume and net incomemodule, using that to have a better net income with adjusted price&volume. Wecompared different engine hood tooling investment solution, to have a good quality&cost hood solution. We re-run the DCF with updated data, and achieved requirementIn the forth chapter, we summarized the analysis processs, and lesson learnt fromthis project.