Please read the WORD document then try to finish the Excel work. (Only the red part, named “Shock to assumption).
FMEA Interview Documentation

Risk:

Description: Pear Inc. is a company that belongs to the handheld electronic device market, it manufactures SmartPhones and similar devices, and sells them mainly through the retail outlets in the United States. It also provides customers with the service of InfinityG, which allows for better reception and faster data transfer rates.

Scenario: Mutation explodes in the U.S. and the vaccines are found not to be effective, the effectiveness level drops considerably below the level considered safe. And we end up having new infections staying at a level that’s pretty elevated. If quarantine continues, the sales platform would be negatively impacted. Pear relies heavily on in-store sales and the company was behind the curve in its online platform. Customer Service is not good. Sales are largely limited to online distribution,

Likelihood: 15%-25%. Midpoint is 20%

Financial Impact:

· The sales retention rate is 12% lower in salespeople beyond that would ordinarily lose this year. In year 2 and 3, the sales retention rate is 8% lower, 6% lower in year 4, 4% lower in year 5, 2% lower in year 6, and 0 after year 6.

· The sales recruitment is 100 lower this year for new people hired, 50 lower in year 2, and another 25 lower between through year 3 to year 6.

· The average amount of sales per salesperson(production rate) is 30% lower this year, 20% lower in year 2, and 10% lower in year 3. Then it goes back to normal.

· Might decide to cut the price of phones, 15% lower than baseline this year, 10% lower in year 2, 5% lower in year 3.

· The earned rate in the invested asset is 5% lower this year, 3% lower next year, 1.5% lower in year 3, then goes to normal rates.

· R&D spending increases 7.5M each year through year 1 to year 3.

· For Additional SG&A expenses Pear Inc. is a company that belongs to the handheld electronic device market, manufactures SmartPhones and similar devices, and sells them through retail outlets in the United States. It also provides customers with the service of InfinityG, which allows for better reception and faster data transfer rates. In addition to the R&D expenditures, there would be another 40M in medical costs, anther 25M in additional IT and sales training, so that’s another 65M in sales and general administration expenses; next year, there would be another 20M for medical cost, and 5M in advertisement, so another 25M in sales and general expenses; in 2023, expect only 5M in additional medical cost.

· Costs of expense are not impacted because we have a stable supply chain.

· Tax rate and inflation rate remain unchanged.

· Fixed expenses remain unchanged because the company still plans to keep stores open, but they’ll continue to look at that.

· The interest rate on debt would be 1% lower than baseline through 2021 to 2023.