Example of analysis of an investment project; build vs buy.

1. CARBON FIBER PLANT
IN CZECH REPUBLIC
SOLUTION FOR LEAD TIME
&
OPPORTUNITY FOR FUTURE TIME

2. Rising Lead Time for CF Orders
1999 2000 2001 2002 2003*
10-14 days 60 55 30 10 5
14-20 days 40 40 20 20 10
20-30 days 0 5 40 50 15
30-42 days 0 0 10 20 70

3. Rising Delivery Time
0
5
10
15
20
25
30
35
40
1999 2000 2001 2002 2003
Year
Days

4. Losing Bread & Butter

5. Estimated Revenue Losses
 75K monthly in capital equipment
 35K monthly in ensuing accessories
100K!!!!!

6. What are we going to do about it?
1. Do Nothing/Nada/Nichts/Nichego
2. Find a new supplier in US
3. Build our own plant
4. Find a supplier outside US
5. Establish a partnership with PolyCzech

7. Finding new supplier in US
 Rare process
 Labor intensive process
 Large Volume orders (e.g. aeronautic)

8. Growing Sales
Product Category 2000 2001 2002 2003 2004 2005
Category A -
Patient Positioning $75,000 $150,000 $350,000 $800,000 $1,500,000 $2,800,000
Category B -
Treatment Table
Tops 500,000 1,200,000 2,100,000 3,300,000 4,500,000 5,600,000
Total $575,000 $1,350,000 $2,450,000 $4,100,000 $6,000,000 $8,400,000

9. Building our own plant
 Rare process
 Labor intensive process
 Nobody wants to move to Iowa

10. Why PolyCzech is the winner
ComposiFlux
Product Cost $5,200
Delivery Cost $120
Total Intangible
Cost $5,320
Delivery Time
30-40
days
PolyCzech
Product Cost $2,800
Delivery Cost $450
Total Intangible
Cost $3,250
Delivery Time
10-14
days

11. Partnership makes sen$e
 Superb expertise
 Inexpensive labor
 Sexy products
 Lower corporate tax
 Access to Europe
 Trustworthy

12. Increased value & short payback
Partnership Terms 50/50
MED-TEC Investment $150,000
Required Rate of Return 10%
Historic Net Profit Margin 10-20%
Life of Capital Equipment 5 years
Year 2004 2005 2006 2007 2008
CF Sales 6,000,000 8,400,000 11,350,000 14,700,000 18,300,000
Present Value of Cash Flows $42,327,200
Net Present Value $42,177,200
Payback Period 6 Months

13. Let’s seize the moment!!!
• Decrease lead time
• Increase sales
• Increase market share in CF market
• Increase bottom line