Risk Analysis on Investment Decision

Risk Analysis on Investment Decision

Charles Hill

MBA/540

Business decisions always contain a certain amount of risk when expanding into new areas of the market. One way to help mitigate the probability of risk is to develop a detail plan that will help to prepare against all types of risk associated with the project. This plan should include anything that a manager can project. It is also important for the upper management to communicate with the employees about the plan and what they can expect to happen during the process. Change is hard for an organization and the organization's employees without adding apprehension into the equation. Another type of risk that is overlooked is government regulations and the approval process that is sometimes needed for projects. These types of problems often have certain waiting periods that must be followed before the project is able to move forward.

Project Management Lifecycle

NPV vs discount rate comparison for two mutually e...

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These types of delays can be very costly if not planned for correctly. The purpose of most projects is to help generate revenue. If the project cost more than it can possibly generate in revenue the project should be rejected.

In this scenario Silicon Arts Inc. is an organization that manufactures digital imaging integrated circuits. The company grew in 2000 by 78% but in 2001 has lost 40% due to the economic slowdown. SAI would like to increase its market share and also keep pace with the new technology of the industry. In order to accomplish this goal SAI has two options. The first is to expand the existing digital imaging market share and the second is to enter the wireless communication market. The first problem is to determine the cash flow figures of the two scenarios. Senior management could not agree over how the scenarios...