Silicon Arts Inc.,
Analysis of Dig-Image and W-Comm projects
MBA 540
December 4, 2007
University of Phoenix Online
Silicon Arts Inc. Analysis of Dig-image and W-Comm projects
Silicon Arts Inc. (SAI) is a manufacture of digital imaging Integrated Circuits (IC) that are used in digital cameras, DVD players, computers, medical and scientific instrumentation. The major sales are in North America but the company has presence in Europe and South East Asia. SAI grew rapidly in the first years due to the semiconductor industry boom. As the industry began to slow down, SAI watched their revenues fall by 40%. SAI survived the decrease in revenues by cutting costs and freezing capital expenses. Wisely, SAI continued its research and development efforts and developed the IC 1032 ? a specialized chip used in data embedded mobile phones (University of Phoenix, 2007).
Hal Eichner, SAI Chairman, has a two point agenda for the company; increase market share, and keep pace with technology. The management team has developed two project proposals to accomplish the company's goals. The proposals are to expand the Digital Imaging (Dig-image) market share or enter the Wireless Communication (W-Comm) market. The goal is to increase the shareholder's wealth by selecting the appropriate project. Shareholders like to invest in capital projects that are worth more than they cost. "In capital budgeting, the profitability index measures the bang (the dollar return) for the buck invested. Hence, it is useful for capital rationing" (Ross, 2005). An analysis of the two projects will be evaluated so that the Board of Directors and shareholders may make an informed decision. In order to complete the analysis, the Net Present Value (NPV), ...