e Study us HarleyDavidson Income Statement HarleyDavidson an

e. Study. us Harley-Davidson Income Statement Harley-Davidson – an American motorcycle manufacture based in Milwaukee, WI In 1903 William S. Harley and Arthur Davidson make available to the public the first production Harley-Davidson motorcycle. • • Public in 1987 (NYSE) Nearly zero debt Current details • 10. 3% market share • 686 dealers in U. S. A • 267. 4 thousand unit sales in 2008 • 9, 700 employees • $25 Stock Price (NYSE) Revenue H-D / Buell Motorcycle Parts & Accessories General Merchandise Buell Motorcycle Defense and Other Total Revenue Cost of Product Gross Profit Expense Operating Expense Advertising Expense Finance Operating Income Corporate Expense Total Operating Income Investment Income Interest Expense Income Before Taxes Income Taxes Net Income 2008 $4, 278, 400 $858, 748 $313, 835 $123, 086 $20, 397 $5, 594, 466 $3, 663, 488 $1, 930, 978 $664, 429 $300, 000 $82, 765 $20, 131 $1, 029, 183 $9, 495 $4, 542 $1, 034, 136 $379, 259 $654, 877 Copyright 2010 © michael. roberson@e. Study. us, All rights reserved

e. Study. us New Harley-Davidson demand equation quantity demand for new Harley-Davidson motorcycles price of new Harley-Davidson motorcycles average price of other new street motorcycles $16, 000 $13, 000 average price of used Harley-Davidson motorcycles $10, 000 Harley-Davidson advertising expense (millions) $300 (millions) average income of street motorcycle riders $45, 000 average price of gasoline $2. 64 average purchase value of Harley-Davidson parts and accessories $500 average of street motorcycle riders 42 years Possible Improvements • • Harley Davidson product line prices and quantities (multiple simultaneous demand functions) Specific competitor prices (Honda, Suzuki, Yamaha, Kawasaki, BWM, etc…) Insurance Price Automobile Price Index Copyright 2010 © michael. roberson@e. Study. us, All rights reserved

e. Study. us New Harley-Davidson demand equation inverse demand function Copyright 2010 © michael. roberson@e. Study. us, All rights reserved

e. Study. us New Harley-Davidson demand elasticities Own price Price of Competitive Bikes (Substitute) Price Gasoline (Complement) Income Copyright 2010 © michael. roberson@e. Study. us, All rights reserved

e. Study. us New Harley-Davidson cost equations Copyright 2010 © michael. roberson@e. Study. us, All rights reserved

e. Study. us Harley-Davidson Income Statement Revenue H-D / Buell Motorcycle 2008 $4, 278, 400 Parts & Accessories $858, 748 General Merchandise $313, 835 Buell Motorcycle $123, 086 Defense and Other $20, 397 Total Revenue $5, 594, 466 Cost of Product $3, 663, 488 Gross Profit $1, 930, 978 PQ Demand Function Var. Inter H-D Price Comp. Price Used H-D Price H-D Adv. Exp. Rider Income Gas Price Parts / Mer Price Rider Age Motorcycle Sales Coef. -933. 884 -0. 022 0. 0038 143. 2 0. 16 0. 029 35. 6 -0. 46 4. 7 Elast. $16, 000 $13, 000 $10, 000 $300 $45, 000 $2. 64 $500 42 -1. 32 0. 18 0. 33 4. 88 0. 35 -0. 86 267. 4 Expense Operating Expense $664, 429 Advertising Expense $300, 000 Finance Operating Income $82, 765 Total Cost Function Corporate Expense $20, 131 Exp 1 Total Operating Income $1, 029, 183 Coef 1 Exp 2 Investment Income $9, 495 Interest Expense $4, 542 Income Before Taxes Coef 2 Coef 3 Coef 4 3 0. 12 2 76. 5 20, 000 1, 491, 069 $1, 034, 136 Income Taxes $379, 259 Net Income $654, 877 Copyright 2010 © michael. roberson@e. Study. us, All rights reserved

e. Study. us Harley-Davidson Income Statement A 1 Revenue B C D E F 2008 Demand $4, 278, 400 =G 13*H 4 Var. 2 H-D / Buell Motorcycle 3 Parts & Accessories $858, 748 Inter 4 General Merchandise $313, 835 5 Buell Motorcycle $123, 086 6 Defense and Other $20, 397 7 Total Revenue $5, 594, 466 8 Cost of Product $3, 663, 488 9 Gross Profit $1, 930, 978 10 $664, 429 12 Advertising Expense $300, 000 13 Finance Operating Income $82, 765 14 Corporate Expense $20, 131 Total Operating Income Coef. I J Level Variables Elast. 1 H-D Price -0. 022 $16, 000 -1. 32 Comp. Price 0. 0038 $13, 000 0. 18 Used H-D Price 143. 2 0. 625 $10, 000 0. 33 H-D Adv. Exp. 0. 16 $300 Rider Income 0. 029 $45, 000 4. 88 35. 6 $2. 64 0. 35 -0. 46 $500 -0. 86 4. 7 42 42 Parts / Mer Price Operating Expense H -933. 884 Gas Price Expense 11 15 =G 17*G 13^G 16 -G 19*G 13^G 18+G 20*G 13+G 21 G Rider Age Motorcycle Sales 267. 4 =SUMPRODUCT(G 3: G 11, H 3: H 11) Total Cost $1, 029, 183 Exp 1 16 17 Investment Income $9, 495 Coef 1 18 Interest Expense $4, 542 Exp 2 19 Income Before Taxes 20 Income Taxes $379259 21 Net Income $654, 877 $1, 334, 136 0. 37 Tax Rate 3 0. 12 2 Coef 2 76. 5 Coef 3 20, 000 Coef 4 1, 491, 069 Copyright 2010 © michael. roberson@e. Study. us, All rights reserved

e. Study. us Statistical Error and Financial Relevance 95% confident that the true coefficient is between -0. 0222352 and -0. 0217648 Demand Function Variable Coef. Std. Error Low High Intercept -933. 884 H-D Price -0. 022 -0. 00012 -0. 02224 -0. 02176 Comp. Price 0. 0038 0. 000081 0. 003641 0. 003959 Used H-D Price 143. 2 1. 54 140. 1816 146. 2184 H-D Adv. Exp. 0. 16 0. 0022 0. 155688 0. 164312 Rider Income 0. 029 0. 00045 0. 028118 0. 029882 35. 6 1. 11 33. 4244 37. 7756 -0. 46 -0. 005 -0. 4698 -0. 4502 4. 7 0. 2 4. 308 5. 092 Gas Price Parts / Mer Price Rider Age Copyright 2010 © michael. roberson@e. Study. us, All rights reserved

e. Study. us Statistical Error and Financial Relevance Revenue Sales H-D / Buell Motorcycle Parts & Accessories General Merchandise Buell Motorcycle Defense and Other Total Revenue Cost of Product Gross Profit Expense Operating Expense Advertising Expense Conf. Low 191. 6 $3, 065, 524 $858, 748 $313, 835 $123, 086 $20, 397 $4, 381, 590 $3, 358, 742 $1, 022, 848 Point Est. 267. 4 $4, 278, 400 $858, 748 $313, 835 $123, 086 $20, 397 $5, 594, 466 $3, 663, 488 $1, 930, 978 Conf. High 343. 2 $5, 491, 276 $858, 748 $313, 835 $123, 086 $20, 397 $6, 807, 342 $4, 195, 377 $2, 611, 965 $664, 429 $300, 000 Finance Operating Income Corporate Expense Total Operating Income $82, 765 $20, 131 $121, 053 $82, 765 $20, 131 $1, 029, 183 $82, 765 $20, 131 $1, 710, 170 Investment Income Interest Expense Income Before Taxes Income Taxes Net Income $9, 495 $4, 542 $126, 006 $46, 211 $79, 795 $9, 495 $4, 542 $1, 034, 136 $379, 259 $654, 877 $9, 495 $4, 542 $1, 715, 123 $629, 004 $1, 086, 119 Demand Variable Inter H-D Price Comp. Price Used H-D Price H-D Adv. Exp. Rider Income Gas Price Parts / Mer Price Rider Age Coef. -933. 884 -0. 022 0. 0038 143. 2 0. 16 0. 029 35. 6 -0. 46 4. 7 Motorcycle Sales 267. 4 Low High -0. 02224 0. 003641 140. 1816 0. 155688 0. 028118 33. 4244 -0. 4698 4. 308 -0. 02176 0. 003959 146. 2184 0. 164312 0. 029882 37. 7756 -0. 4502 5. 092 Critical-t=1. 96 Copyright 2010 © michael. roberson@e. Study. us, All rights reserved

e. Study. us Profit Maximizing level of Harley-Davidson production Copyright 2010 © michael. roberson@e. Study. us, All rights reserved

e. Study. us Profit Maximizing level of Harley-Davidson production Q 250 251 252 253 254 255 256 257 258 259 260 261 262 263 264 265 266 267. 4 268 269 270 271 272 273 274 275 TC $3, 584, 819 $3, 589, 083 $3, 593, 374 $3, 597, 694 $3, 602, 043 $3, 606, 422 $3, 610, 831 $3, 615, 272 $3, 619, 744 $3, 624, 250 $3, 628, 789 $3, 633, 362 $3, 637, 970 $3, 642, 614 $3, 647, 294 $3, 652, 012 $3, 656, 767 $3, 663, 488 $3, 666, 393 $3, 671, 266 $3, 676, 179 $3, 681, 134 $3, 686, 131 $3, 691, 171 $3, 696, 254 $3, 701, 382 TFC $1, 491, 069 $1, 491, 069 $1, 491, 069 $1, 491, 069 $1, 491, 069 $1, 491, 069 $1, 491, 069 TVC $2, 093, 750 $2, 098, 014 $2, 102, 305 $2, 106, 625 $2, 110, 974 $2, 115, 353 $2, 119, 762 $2, 124, 203 $2, 128, 675 $2, 133, 181 $2, 137, 720 $2, 142, 293 $2, 146, 901 $2, 151, 545 $2, 156, 225 $2, 160, 943 $2, 165, 698 $2, 172, 419 $2, 175, 324 $2, 180, 197 $2, 185, 110 $2, 190, 065 $2, 195, 062 $2, 200, 102 $2, 205, 185 $2, 210, 313 MC $4, 250 $4, 277 $4, 305 $4, 334 $4, 364 $4, 394 $4, 425 $4, 457 $4, 489 $4, 522 $4, 556 $4, 591 $4, 626 $4, 662 $4, 699 $4, 736 $4, 774 $4, 829 $4, 853 $4, 893 $4, 934 $4, 976 $5, 018 $5, 061 $5, 105 $5, 150 AVC $8, 375 $8, 359 $8, 342 $8, 327 $8, 311 $8, 296 $8, 280 $8, 265 $8, 251 $8, 236 $8, 222 $8, 208 $8, 194 $8, 181 $8, 168 $8, 155 $8, 142 $8, 124 $8, 117 $8, 105 $8, 093 $8, 081 $8, 070 $8, 059 $8, 048 $8, 038 AFC $5, 964 $5, 941 $5, 917 $5, 894 $5, 870 $5, 847 $5, 824 $5, 802 $5, 779 $5, 757 $5, 735 $5, 713 $5, 691 $5, 669 $5, 648 $5, 627 $5, 606 $5, 576 $5, 564 $5, 543 $5, 522 $5, 502 $5, 482 $5, 462 $5, 442 $5, 422 ATC $14, 339 $14, 299 $14, 259 $14, 220 $14, 181 $14, 143 $14, 105 $14, 067 $14, 030 $13, 993 $13, 957 $13, 921 $13, 885 $13, 850 $13, 816 $13, 781 $13, 747 $13, 700 $13, 681 $13, 648 $13, 615 $13, 584 $13, 552 $13, 521 $13, 490 $13, 460 Price $16, 791 $16, 745 $16, 700 $16, 655 $16, 609 $16, 564 $16, 518 $16, 473 $16, 427 $16, 382 $16, 336 $16, 291 $16, 245 $16, 200 $16, 155 $16, 109 $16, 064 $16, 000 $15, 973 $15, 927 $15, 882 $15, 836 $15, 791 $15, 745 $15, 700 $15, 655 MR $5, 427 $5, 336 $5, 245 $5, 155 $5, 064 $4, 973 $4, 882 $4, 791 $4, 700 $4, 609 $4, 518 $4, 427 $4, 336 $4, 245 $4, 155 $4, 064 $3, 973 $3, 845 $3, 791 $3, 700 $3, 609 $3, 518 $3, 427 $3, 336 $3, 245 $3, 155 TR $4, 197, 727 $4, 203, 109 $4, 208, 400 $4, 213, 600 $4, 218, 709 $4, 223, 727 $4, 228, 655 $4, 233, 491 $4, 238, 236 $4, 242, 891 $4, 247, 455 $4, 251, 927 $4, 256, 309 $4, 260, 600 $4, 264, 800 $4, 268, 909 $4, 272, 927 $4, 278, 400 $4, 280, 691 $4, 284, 436 $4, 288, 091 $4, 291, 655 $4, 295, 127 $4, 298, 509 $4, 301, 800 $4, 305, 000 Profit $612, 908 $614, 026 $615, 906 $616, 666 $617, 306 $617, 824 $618, 219 $618, 492 $618, 641 $618, 666 $618, 565 $618, 339 $617, 986 $617, 506 $616, 898 $616, 161 $614, 912 $614, 298 $613, 171 $611, 912 $610, 521 $608, 997 $607, 339 $605, 546 $603, 619 Copyright 2010 © michael. roberson@e. Study. us, All rights reserved