ARTHUR D. LITTLE, INC. 

Acom Park 

Cambridge, Massachusetts 

02140-2390 

.. 

Because software is inherently complex and_ may not 

be completely free of errors, you are advised to verify 

your work. ~n no event will Arthur D. Little be liable 

for direct, indirect, special, incidental, or 

consequential damages. arising out of the use of 

or inability to use the software or documentation, 

even if advised of the possibility of such damages. 

Government 

Regulatory Impact 

Model 

October 30, 1998 
12/14/98 

Scenario Description 

Base Year 

Announcement Year 

Standard Year 

Tax Rate 

Discount Rate for NPV 

Inflation Rate 

Working Capital 

Base Year Unit Price 

Base Year Unit Sales 

Unit Sales Growth Rate 

Standard SG&A 

Research and Development 

Ordinary Depreciation 

Ordinary Capital Expenditures 

Variable Overhead as% of Total 

Standards Case Efficiency Level 

=> Efficiency Improvement of 

Mapufactudne Costs 

Materials I Unit 

Labor I Unit 

Overhead I Unit (excl. Depreciation) 

Government Regulatory 

Impact Model 

Assumptions Page for 

Clothes Washers 

Clothes Washers 

1998 Beginning year for analytical purposes 

1-------,.1"'!"9"""99-1 Year in which the regulation announcement is made 

2003 Year in whiclr the regulation takes effect ------~ 

42.8% 

7.25% 

_____ o_.O_"!c_,o [per annum 

,__ ___ l_0_.5_0_%_,o <~(Revenue 

285.90 ($) 

t----7_.0_7-1(000.000) 

.__ ____ o_.o_o_%_,.o 1Per a111111m 

1----l..,.8-:.o,,,o..,.°/c.,.fo nf Rei·en11e 

1.80% of Rei·enue 

:::::=======: 

_____ 3_.5_1_%-10 nf Rei•en11e 

____ -4_.4_3_°/c~o of Revenue 

100%1 

Base Incremental Doe to 

Year Standard 

148.70 ,,..,.,x· 10.71 ($Jper11nil 

29.30 (0.02) ($)per 11ni1 

..._ 

-------t-~------"""'1 ___ 23_.4_5_.. ___ _.(._l._80.....,) ($)per unit 

Industry Mark-up (over full production costs) 

Standard Year Unit Price 

Copverslon Costs 

Capital Expenditures 

Useful Life 

Design & Marketing Expenses 

Major Assumptions 

($000.000) 

·ears 

$000.000) 

GRIM_lph.XLS 
.. 

AHAM Data Submittal-Shipment weighted average of most likely values 

Appliance Type: Clothes Washer 

Appliance Clan (anticipated): Standard (1.6 cu. ft.or greater capacity) 

Data Characteristic: Shipment Weighted Average of Most Likely 

Yearly Production Volume of "Baseline"= 7,065,761 units 

Standard Product Characterisics Variable Costs Total Total Incremen. No.of ::w<G''•pit~~ .L 

Case Percent MEF Cost Per Unit (a) Variable Fixed Mfg.Cost Re1pondents ·. ,·converstori••·r 

Efficiency hnprovement Materials Labor Overhead Costs (j) Costs (o) {p) • F.x~riditur~· 

Level (b) cu. ft.lkWhlcycle (g) (h) (i) ($per Unit) ($per Unit) ($per Unit) ($per Unit) .. : f:(S .. 9iill) ••. j} 

[I) (2) [12) (13) [14) [15) [22) (23) (::;f'ix¢dCOSt X'Shipments x Useful_lil 

0 Baseline 0.817 .... : .... :·:.(:: ... , .... : 

I 5 0.860 $0.01 $0.01 $0.00 $0.02 $0.07 $0.09 5 ... \.y·s2A1 ... . . 

2 10 0.908 $0.25 $0.04 $0.01 $0.30 $0.61 $0.91 5 1.-•: ••. ('/$21.55··· 

3 15 0.961 $3.18 $0.10 $0.04 $3.32 $1.01 $4.33 5 ... ,, ..... $35.68':• ·:·::::: :·-::.:.·. 

4 20 1.021 $10.71 ($0.02) ($1 .80) $8.89 $6.21 $15.10 5 ;:.:_;.·. f$219.~9: 

5 25 1.089 $36.14 $8.61 $0.09 $44.84 $19.29 $64.13 5 '/':\rn:St?8J:4W 

::\ ;• '':(:••\:<:\::: 

6 35 1.257 $86.73 $10.94 $7.78 $105.45 $22.72 $128.17 5 <• \:($802:67 

7 40 1.362 $87.15 $10.94 $7.78 $l05.87 $22.72 $128.59 5 .··::(}.$8Q2'.67/ 

8 45 1.485 $125.58 $15.52 $14.51 $155.61 $24.67 $180.28 4 {· ;:-:: :?;$871.56; 

9 50 1.634 $132.40 $15.68 $14.51 $162.59 $24.67 $187.26 4 ·~:<::'Cs~Jl.56 ~ 

!:•:: ••••• :.··;::.:::•::•.:•:<y::::::.::: 
Clothes WMhm 

IU.SE CASE SCENARIO 

Price/Unit 

Unit Sales 

Revenues 

Cost of Sale• 

Labor 

Material 

Overhead - Fixed 

Overhead·- Variable 

Depreciation 

Selling, "General and Administrative 

Standard SG&A 

R&D 

Product Conver.;ion Expense 

Profit Before Tax 

Taxes 

Net Income Before Financing 

Net Income 

Depreciation 

Change in Working Capital 

Cash Flows from Operations 

Ordinary Capital Expenditures 

Conversion Capital Expenditures 

Cash Used In Investment · 

Net Cash Flow 

Terminal Value 

Present Value Factor 

Discounted Cash Flow 

Industry Value (Net Present Value) 

12114198 

$ 789.7 

BneYur 

1998 

285.9 

7.07 

2,020.I 

207.0 

1,050.7 

165.7 

70.9 

363.6 

36.4 

125.8 

53.9 

72.0 

72.0 

70.9 

142.9 

(89.5) 

(89.5) 

53.4 

1.0000 

53.4 

1999 

285.9 

7.07 

2,020.1 

207.0 

1,050.7 

165.7 

70.9 

363.6 

36.4 

125.8 

53.9 

72.0 

72.0 

70.9 

142.9 

(89.5) 

(89.5) 

53.4 

0.9324 

49.8 

2000 

285.9 

7.07 

2,020.1 

207.0 

1,050.7 

165.7 

70.9 

363.6 

36.4 

125.8 

53.9 

72.0 

72.0 

70.9 

142.9 

(89.5) 

(89.5) 

53.4 

0.8694 

46.4 

2001 

285.9 

7.07 

2,020.1 

207.0 

1,050.7 

165.7 

70.9 

363.6 

36.4 

125.8 

53.9 

72.0 

72.0 

70.9 

142.9 

(89.5) 

(89.5) 

53.4 

0.8106 

43.3 

Government Regulatory 

Impact Model 

2002 

285.9 

7.07 

2,020.1 

207.0 

1,050.7 

165.7 

70.9 

363.6 

36.4 

125.8 

53.9 

72.0 

72.0 

70.9 

142.9. 

(89.5) 

(89.5) 

53.4 

0.7558 

40.3 

2003 

285.9 

7.07 

2.020.1 

207.0 

1,050.7 

165.7 

70.9 

363.6 

36.4 

2004 

285.9 

7.07 

2,020.1 

207.0 

1,050.7 

165.7 

70.9 

363.6. 

36.4 

125.8 125.8 

53.9 . 53.9 

72.0 72.0 

72.0 72.0 

70.9 70.9 

142.9 142.9 

(89.5) (89.5) 

(89.5) (89.5) 

53.4 53.4 

0. 7047 0.6571 

37.6 35.I 

Base Case 

2005 

285.9 

7.07 

2,020.l 

207.0 

1,050.7 

165.7 

70.9 

363.6 

36.4 

125.8 

53.9 

72.0 

72.0 

70.9 

142.9 

(89.5) 

(89.5) 

53.4 

0.6127 

32.7 

2006 

285.9 

7.07 

2,020.1 

207.0 

1,050.7 

165.7 

70.9 

363.6 

36.4 

125.8 

53.9 

72.0 

72.0 

70.9 

142.9 

(89.5) 

(89.5) 

53.4 

0.5712 

30.5 

2007 

285.9 

7.07 

2,020.l 

207.0 

1,050.7 

165.7 

70.9 

363.6 

36.4 

125.8 

53.9 

72.0 

72.0 

70.9 

142.9 

(89.5) 

(89.5) 

53.4 

0.5326 

28.4 

2008 

285.9 

7.07 

2,020.l 

207.0 

1,050.7 

165.7 

70.9 

363.6 

36.4 

125.8 

53.9 

72.0 

72.0 

70.9 

142.9 

(89.5) 

(89.5) 

53.4 

0.4966 

26.5 

2009 

285.9 

7.07 

2,020.1 

207.0 

1,050.7 

165.7 

70.9 

363.6 

36.4 

125.8 

53.9 

72.0 

72.0 

70.9 

142.9 

(89.5) 

(89.5) 

53.4 

0.4631 

24.7 

2010 

285.9 

7.07 

2,020.l 

207.0 

1,050.7 

165.7 

70.9 

363.6 

36.4 

125.8 

53.9 

72.0 

72.0 

70.9 

142.9 

(89.5) 

(89.5) 

53.4 

0.4318 

23.0 

2011 

285.9 

7.07 

2,020.1 

207.0 

1,050.7 

165.7 

70.9 

363.6 

36.4 

125.8 

53.9 

72.0 

72.0 

70.9 

142.9 

(89.5) 

(89.5) 

·53_4 

0.4026 

21.5 

.. , 

2012 

285.9 

7.07 

2,020.I 

207.0 

1,050.7 

165.7 

70.9 

363.6 

36.4 

125.8 

53.9 

72.0 

72.0 

70.9 

142.9 

(89.5) 

(89.5) 

53.4 

736.3 

0.3754 

296.4 

GRIM_lph.XLS 
Ciorhn \\1

°'hrn 

STANDARD CASE SCENARIO 

Price/Unit 

Unit Sales 

Revenues 

Cost of Sales 

Labor 

Material 

Overhead • Fixed 

Overhead - Variable 

Depreciation 

Selling, General and Administrativr 

Standard SG&A 

R&D 

Product Conversion Expense 

Profit Before Tax 

T8XCS 

Net Income Before Financing 

Net Income 

Depreciation 

Change in Working Capital 

Cash Flows from Operations 

Ordinary Capital Expenditures 

Conversion Capital Expenditu1"S 

Cash Used In Investment 

Net Cash Flow 

Terminal Value 

Present Value Factor 

Discounted Cash Flow 

Industry Value (Net P=ent Value) 

12/14/98 

s 657 

Bau YNr 

1998 

285.90 

7.07 

2,020.l 

207.0 

1,050.7 

165.7 

70.9 

363.6 

36.4 

125.8 

53.9 

72.0 

72.0 

70.9 

142.9 

(89.5) 

(89.5) 

53.4 

1.0000 

53.4 

Announce 

Yur 

1999 

285.90 

7.07 

2,020.1 

207.0 

1,050.7 

165.7 

70.9 

363.6 

36.4 

125.8 

53.9 

72.0 

72.0 

70.9 

142.9 

(89.S) 

(4.4) 

(93.9) 

49.0 

0.9324 

45.7 

2000 

285.90 

7.07 

2,020.1 

207.0 

1.050.7 

165.7 

70.9 

363.6 

36.4 

12S.8 

S3.9 

72.0 

72.0 

70.9 

142.9 

(89.5) 

(37.3) 

(126.8) 

16.l 

0.8694 

14.0 

2001 

285.90 

7.07 

2,020.1 

207.0 

1,050.7 

165.7 

70.9 

363.6 

36.4 

125.8 

53.9 

72.0 

72.0 

70.9 

142.9 

(89.5} 

(79.0) 

(168.5) 

(25.6) 

0.8106 

(20.7) 

Govemmeni Regulatory 

Impact Model 

Stand•rd YNr 

2002 2003 

285.90 306.29 

7.07 7.07 

2,020. l 2, 164. l 

207.0 

1,050.7 

165.7 

70.9 

363.6 

36.4 

125.8 

53.9 

72.0 

72.0 

70.9 

142.9 

(89.5) 

(98.7) 

(188.2) 

(45.3) 

0.7558 

(34.3) 

206.9 

1,126.4 

153.0 

114.8 

389.5 

39.0 

134.6 

57.6 

77.0 

77.0 

114.8 

(15.1) 

176.7 

(133.4) 

(133.4) 

43.3 

0.7047 

30.5 

2004 

306.29 

7.07 

2,164.1 

206.9 

1,126.4 

153.0 

. 114.8 

389.5 

39.0 

134.6 

57.6 

77.0 

77.0 

114.8 

191.8 

(133.4) 

(133.4) 

58.4 

0.6571 

38.4 

Standard Case 

200S 

306.29 

7.07 

2,164.1 

206.9 

1,126.4 

153.0 

114.8 

389.5· 

39.0 

134.6 

57.6 

77.0 

77.0 

114.8 

191.8 

(133.4) 

(133.4) 

58.4 

0.6127 

35.8 

2006 

306.29 

7.07 

2,164.1 

206.9 

1.126.4 

153.0 

114.8 

389.5 . 

39.0 

134.6 

57.6 

77.0 

77.0 

114.8 

191.8 

(133.4) 

(133.4) 

58.4 

0.5712 

33.4 

2007 

306.29 

7.07 

2,164.l 

206.9 

1,126.4 

153.0 

114.8 

389.5 

39.0 

134.6 

57.6 

77.0 

77.0 

114.8 

191.8 

(133.4) 

(133.4) 

58.4. 

O.S326 

31.1 

2008 2009 

306.29 306.29 

7.07 . 7.07 

2,164.1 2,164.1 

206.9 

1,126.4 

IS3.0 

114.8 

389.5 

39.0 

134.6 

57.6 

77.0 

77.0 

114.8 

191.8 

(133.4) 

(133.4) 

58.4 

0.4966 

29.0 

206.9 

1,126.4 

153.0 

114.8 

389.5 

39.0 

134.6 

57.6 

77.0 

77.0 

114.8 

191.8 

(133.4) 

(133.4) 

58.4 

0.4631 

27.1 

2010 

306.29 

7.07 

2,164.1 

206.9 

1,126.4 

153.0 

114.8 

389.5 

39.0 

134.6 

57.6 

77.0 

77.0 

114.8 

. 191.8 

(133.4) 

(133.4) 

S8.4 

0.4318 

25.2 

2011 

306.29 

7.07 

2,164.1 

206.9 

1,126.4 

153.0 

114.8 

389.5 

39.0 

134.6 

51.6 

17.0 

77.0 

114.8 

191.8 

(133.4) 

(133.4) 

S8.4 

0.4026 

23.5 

.. , 

2012 

306.29 

7.07 

2,164.1 

206.9 

1,126.4 

153.0 

114.8 

389.S 

39.0 

134.6 

57.6 

77.0 

77.0 

114.8 

191.8 

(133.4) 

(133.4) 

58.4 

805.9 

0.37S4 

324.4 

GRIM_ I ph.XLS 
12/14/98 

Government Regulatory 

Impact Model 

Summary Report for 

Clothes Washers 

PreRegulation 

(Base) 

1998 

Percent Improvement in MEF 20% 

Unit Shipments (000,000) 7.07 

Price per unit $ 285.90 

Total Revenues ($000,000) $ 2,020.10 

Profit After Tax ($000,000) $ 71.97 

Net Cash Flow ($000,000) $ 53.38 

Industry Value (Net Present Value) ($000.000) $ 789.70 

Change in Industry Value ($000,000) 

% Change in Industry Value 

MAJOR ASSUMPTIONS 

Manufacturing Costs 

Materials per Unit $ 148.70 

Labor per Unit $ 29.30 

Overhead per Unit $ 23.45 

Conversion Cost 

Capital Expenditures ($000,000) 

Design & Marketing Expenses ($000,000) 

Summary Report 

PostI 

Regulation 

(Standard) 

2003 

7.07 

$ 306.29 

$ 2,164.14 

$ 77.01 

$ 43.3 l 

$ 656.50 

$ . (133.20) 

-16.9'!/n 

$ 159.4 l 

$ 29.28 

$ 21.65 

$ 219.39 

$ 

GRIM_ l ph.XLS 
·' 

Wl 

= :S ·a 

"" 

60 

40 

20 

0 

(20) 

(40) 

Government Regulatory 

Impact Model 

CASH FLOW TOTALS 

Percent Improvement in MEF= 20 % 

(60)-'-~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~-' 

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 

12/14/98 

-+-Base 

-e- Standard 

GRIM_ I ph.XLS 
900 

800 

700 

600 

"' 500 c:I 

a ·9 

6't 400 

300 

200 

100 

0 

12/14/98 

Government Regulatory 

Impact Model 

INDUSTRY VALUE (NPV) 

Percent Improvement in MEF= 20 % 

II Base 

•Standard 

GRIM_lph.XLS 
200 

180 

160 

140 

120 

"' c 

= .... 

a 100 

e 

6A 

80 

60 

40 

20 

0 

12/14/98 

Government Regulatory 

Impact Model 

CASH USED IN INVESTMENTS 

Percent Improvement in MEF= 20 % 

-+-Base -e- Stan~ard 

1998 1999 2000. 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 

GRIM_ l ph.XLS 

I 
•: ~ " ' 

Government Regulatory 

Impact Model 

Prod Hold Factor 0.98 

Product Conversion Factors 

l 2 3 4 5 6 7 8 9 10 11 12 

2% 2% 2% 2% 2% 2% 2% ·2% 2% 2% 2% 2% 

98% 44% 39<'/o 44% 23% 15% 17% 15% 15% 15% 15% i5%. 

54% 34% 35% 29% 23% 18% 29% 29% 29% 29% 29% 

25% 17% 29% 29% 20% 21% 21% 21% 21% 21% 

2% 15% 20% 20% 15% 15% 15% 15% 15% 

2% 10% 13% 16% 16% 16% 16% 16% 

2% 10% 1% 1% 1% 1% 1% 

2% 1% 1% 1% 1% 1% 

1% 1% 1% 1% 1% 

0% 0% 0% 0% 

0% 0% 0% 

0% 0% 

0% 

these are per the original grim m0tlel 

Conversion Expenditure Factors 

1 2 3 4 5 6 7 8 9 10 II 12 

100% 45% 40% 45% 23% 15% 17% 15% 15% 15% 15% 15% 

55% 35% 36% 30% 23% 18% 30% 30% 30% 30% 30% 

25% 17% 30% 30% 20% 21% 21% 21% 21% 21% 

2% 15% 20% 20% 15% 15% 15% 15% 15% 

2% 10% 13% 16% 16% 16% 16% 16% 

2% 10% 1% 1% 1% 1% 1% 

2% 1% 1% 1% 1% 1% 

1% 1% 1% 1% 1% 

0% 0% 0% 0% 

0% 0% 0% 

0% 0% 

0% 

100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 

12/14/98 conversion factors GRIM_lph.XLS