After completing the Capital Budgeting simulation the best decision to make is to enter the wireless communication market. Entering the wireless communication market will allow the company to achieve the goals of increasing market share and keep up with technology. Later he or she will learn why is better to go with the project of entering the wireless communication market.
Analysis of the operational cash flows for Dig Imaging and W-Comm
Investing in wireless communication market will bring more revenue and lower expenses through out the life of the project. Despite the success that the new project is going to bring, competition and comparable product will reduce the price by five percent in year two and three as well as in year four through seven. In regards to marketing expenses, the cost will go up for the first three years approximately five percent, however, for years four through seven will be lower approximately three percent.
The net present value for the wireless communication proposal for the possible scenarios that may affect cash flow is $20, 209 with an internal rate of return of 35.40 percent. Compare to the net present value of $9,462 and an internal; rate of return of 26.8 percent for the digital imaging proposal. The higher the net present value the more positive is the outcome of the project.
Analysis of the capital expenditure decisions
The net present value for the capital expenditure was $20642 with an internal rate of return of 36.90 for w-com. On the other hand, digital imaging proposal had a net present value of $2675 with an internal rate or return of 21 percent.
The initial market research cost is a sunk cost. “A sunk cost is a cost that has already occurred. Because they are in ...