Essay about Art Inc.: Global Innovation’s Challenges Case Study

921 Words Apr 15th, 2012 4 Pages
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Essay Sample: Page 2
In fact, if we

assume that there are no interest expenses, and therefore operating income would match pretax margins, the projections

clearly show a high profitable investment, apart from the launch year where only the O.I. are 5% less than the target.

With some calculations, we can deduct that, given the 2M$ investment, the ROIC will be always higher than 20% and,

the sales growth, even though in a descending trend, stands in a range between 30% and 20%. Finally we can say that

the payback period is roughly more than 3 years, which, for a product with innovative technology, makes a rather safe

investment.

In the more likely case that capital loans are actually present, forecasted pretax margins could be lower than O.I.

Notwithstanding, two out of three index of profitability (sales growth and ROIC) are higher than ART targets, which still

makes the investment desiderable. Nevertheless it would be advisable for the team to acquire information on the WACC

and a target IRR in order to make more reliable assumptions on the profitability of the project.

Finally, there are further interesting possibilities for the product to be employed in the original application in developing

countries, these were not accounted for in the business plan but could be pursued if the product gives evidences of

market appreciation.

To sum up, considering the above mentioned economics, the strong commitment of the team, the applicability of the
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