# ARTHURD. LITTLE, INC. Acom Park Cambridge, Massachusetts 02140-2390



# .. Because software is inherently complex and_may not be completely free oferrors, you are advised to verify yourwork.**~n** 

# no event will 

# Arthur

# D. Little be liable for direct, indirect, special, incidental, or consequential damages. arising outofthe use of orinabilityto use the software ordocumentation, 

# even if

# advised ofthe possibility ofsuch 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%ofTotal 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 Beginningyear for analyticalpurposes 

### 1-------,.1"'!"9"""99-1 Year in which the regulation announcementis 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 

### 1Pera111111m 

### 1----l..,.8-:.o,,,o..,.°/c.,.fonf Rei·en11e 

### 1.80% of 

### Rei·enue 

# :::::=======:

_____ 3_.5_1_%-10nf 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

MajorAssumptions ($000.000) ·ears $000.000)



### GRIM_lph.XLS

# ..

AHAM Data Submittal-Shipmentweighted average of most likely values Appliance 

### Type: ClothesWasher Appliance Clan (anticipated): Standard 

### (1.6 cu. ft.or greater capacity) Data Characteristic: Shipment Weighted Average ofMost Likely YearlyProduction 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) ($perUnit) ($perUnit) 

## .. :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 andAdministrative 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, GeneralandAdministrativr 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_Iph.XLS

### 12/14/98 Government Regulatory Impact Model



## SummaryReportfor Clothes Washers PreRegulation (Base) 1998 Percent Improvement in MEF 

### 20% Unit Shipments (000,000) 

### 7.07 Price perunit 

### $ 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 

## MAJORASSUMPTIONS 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 

## Post

# I Regulation (Standard) 20037.07 

### $ 306.29 

### $ 2,164.14 

### $ 77.01 

### $ 43.3l 

### $ 656.50 $ 

### . (133.20) 

### -16.9'!/n

$ 159.4l 

### $ 29.28 

### $ 21.65 

### $ 219.39 

### $

GRIM_lph.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_Iph.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 %

IIBase •Standard

GRIM_lph.XLS

## 200 180 160 140 120 

# "' c 

# = .... 100 

# a 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_lph.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 areperthe originalgrim 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