Best Case Most Likely Case Almost -Worst Case Worst Case Turntable Project Net Present Value Scenario Probability $500,000.00 $ 0.25 210,000.00 0.4 Car Audio Project Net Present Value Scenario Probabiltiy $315,000.00 0.30 $175,000.00 0.35 -$100,000.00 0.25 0.10 425,000.00 0.55 $121,000.00 0.35 -$135,000.00 0.10 Noise Project Net Present Value Scenario Probability $ -$90,000.00 0.35 Running head: SOUND ADVICE SOUND ADVICE Griselda Perkins Tommell Rollins Stephen White Park University – MBA615 Mr. Mohamed Massaquoi Running head: SOUND ADVICE SOUND ADVICE Through careful analysis out of the three products, Sound Advice has been looking to put noise product on the market. We feel that it will be the best choice for the company to go due to the financial data and the minimal stand-alone risk compared to the other two projects. Impliment and explain Explain why this model is different we used this model because we are small Answer question on how we arrived to the conclusion Volatile assessment Show risk=we are recommending this and we understand the risk however we see the benefits Mike Jenner, the owner of Sound Production Incorporated, started his business out of his garage and has been in business for over 20 years. Nowadays, Sound Production manufactures and distributes audio equipment and have become one of the best in their industry. Just like many other businesses, Sound Advice tries to come up with ideas for new products and services needed to stay ahead in the industry. They understand that being innovative with the help of the Research and Development department along with other personnel within the company can help them succeed in this process. Mr. Jenner has three projects he would like to start; however, he lacks the funds to do all and must choose one out of the three. Will Stevens, a recent college graduate with a business degree, who will try and Running head: SOUND ADVICE put this knowledge and skills to the test, has been hired to assist in the company’s new business ventures. He will be looked upon to lead in the efforts by looking at the numbers and come up with the best-case scenario. Choosing the right product or products is crucial to their wellbeing. The company knows that there is a risk involved in this process for selecting the right product that will be sold to the consumers. Understanding the market and retrieving the historical data will be essential in the selecting process and a simple understanding of the cost will way out the risks. In addition, Will’s parents have asked that he take a look at their portfolio and provide financial guidance on risk and returns. (question 1)After reviewing each project, we have enough information to analyze the risk of each project. We concentrated on measuring and comparing the stand-alone risk of each proposal. The owner has presented Will with each project’s cost numbers and expected revenue. The team has also provided an analysis on best case, most likely case and Almost-worst case scenarios. The turntable project may require less ….. time as he already has a prototype that he has been developing for the past couple of years. In the best-case scenario, the Net Present value of this project is $500,00.00. For the most likely case scenario the NPV is 210,000.00 and $0 for the almost worst-case scenario. However, for the worst-case scenario the number changed to a -$90,000.00. The Car audio project is a new venture as the Sound Incorporated has never established such product. In the best-case scenario, the Net Present value of this project is $315,00.00. For the most likely case scenario the NPV is $175,000.00 and -$100,00.00 for the almost worst-case scenario. However, for the worst-case scenario the number changed to a $0. The Noise canceling project seems to render more revenue on the most likely case scenario and the company will be able to increase revenue once their patent has been established. For this project, the best-case scenario’s Net Present value of this project is $0. For the most likely case scenario the NPV Running head: SOUND ADVICE is $425,00.00 and -$121,00.00 for the almost worst-case scenario. In the worst-case scenario the NPV negative number increase to -$135,000.00. Best Case Turntable Project Net Present Value Scenario Probability Car Audio Project Net Present Value Scenario Probabiltiy $500,000.00 Most Likely Case $ Almost -Worst Case 210,000.00 Worst Case -$90,000.00 0.25 0.4 0.35 $315,000.00 $175,000.00 -$100,000.00 0.3 0.35 0.25 Noise Project Net Present Value $ 425,000.00 -$121,000.00 Scenario Probability 0.55 0.35 (this will be at the end and of course this is just me killing time at home) 0.10 -$135,000.00 0.10 (question 2) (Question 6) Will’s parents have been asking for investment advice. His mom’s company has recently offered to sell stock to senior employees at a discount from market value. She wondered if she should participate in the plan and how much should be tied up in the shares. His father’s concern was that he may be too conservative with his investments and whether his portfolio’s investments are properly balanced. There are investment funds that are based on age and risk tolerance. Age based funds are mutual funds in which the risk is higher at a younger age and more conservative the older you become. Target fund/lifestyle funds are based risk over time and your risk tolerance (Baldridge, n.d.). As we know Running head: SOUND ADVICE that higher risk can return higher returns, however, his parent may need to consider investing in a more conservative…. This is just random Stuff……. The IRR investment rule tells us that we should take the project which exceeds the opportunity cost of capital (Berk, 2017). We have chosen the …… based on the Net Present Value being rendering a higher monetary value. The value of the firm will increase by million. Different contexts of Risk A smaller company has a greater opportunity to grow than a larger company. In addition, they tend to have a lower stock price, therefore, price increase tends to be greater (Small Firm Affect, n.d.). Opportunities in small firms are more viable than in large firms. A small firm has the capabilities to test new products with nominal investments. A small firm is closer to their customers and is able to request and receive feedback on their new products (Gartenstein, 2018). the availability of external capital and the influence of public trading stock CAPM How and why is the process of risk analysis being different for an investor who was simply trying to determine which stocks to add to a well-diversified portfolio? How do capital asset model and other theories of investor behavior factor into the decision? Shareholders Cost and benefits of the shareholder’s current position (portfolio not diversified). Employees should consider…….. when voting to change the way the firm’s income is distributed. Furthermore, employees should think about…… (between different types of outside investment and equity at sound products) When allocating their own portfolio. Investment decisions based on age Conclusion Running head: SOUND ADVICE Through careful analysis out of the three products, Sound Advice has been looking to put noise product on the market. We feel that it will be the best choice for the company to go due to the financial data and the minimal stand-alone risk compared to the other two projects. Running head: SOUND ADVICE SOUND ADVICE Griselda Perkins Tommell Rollins Stephen White Park University – MBA615 Mr. Mohamed Massaquoi Running head: SOUND ADVICE SOUND ADVICE Through careful analysis out of the three products, Sound Advice has been looking to put noise product on the market. We feel that it will be the best choice for the company to go due to the financial data and the minimal stand-alone risk compared to the other two projects. Impliment and explain Explain why this model is different we used this model because we are small Answer question on how we arrived to the conclusion Volatile assessment Show risk=we are recommending this and we understand the risk however we see the benefits Mike Jenner, the owner of Sound Production Incorporated, started his business out of his garage and has been in business for over 20 years. Nowadays, Sound Production manufactures and distributes audio equipment and have become one of the best in their industry. Just like many other businesses, Sound Advice tries to come up with ideas for new products and services needed to stay ahead in the industry. They understand that being innovative with the help of the Research and Development department along with other personnel within the company can help them succeed in this process. Mr. Jenner has three projects he would like to start; however, he lacks the funds to do all and must choose one out of the three. Will Stevens, a recent college graduate with a business degree, who will try and Running head: SOUND ADVICE put this knowledge and skills to the test, has been hired to assist in the company’s new business ventures. He will be looked upon to lead in the efforts by looking at the numbers and come up with the best-case scenario. Choosing the right product or products is crucial to their wellbeing. The company knows that there is a risk involved in this process for selecting the right product that will be sold to the consumers. Understanding the market and retrieving the historical data will be essential in the selecting process and a simple understanding of the cost will way out the risks. In addition, Will’s parents have asked that he take a look at their portfolio and provide financial guidance on risk and returns. (question 1)After reviewing each project, we have enough information to analyze the risk of each project. We concentrated on measuring and comparing the stand-alone risk of each proposal. The owner has presented Will with each project’s cost numbers and expected revenue. The team has also provided an analysis on best case, most likely case and Almost-worst case scenarios. The turntable project may require less ….. time as he already has a prototype that he has been developing for the past couple of years. In the best-case scenario, the Net Present value of this project is $500,00.00. For the most likely case scenario the NPV is 210,000.00 and $0 for the almost worst-case scenario. However, for the worst-case scenario the number changed to a -$90,000.00. The Car audio project is a new venture as the Sound Incorporated has never established such product. In the best-case scenario, the Net Present value of this project is $315,00.00. For the most likely case scenario the NPV is $175,000.00 and -$100,00.00 for the almost worst-case scenario. However, for the worst-case scenario the number changed to a $0. The Noise canceling project seems to render more revenue on the most likely case scenario and the company will be able to increase revenue once their patent has been established. For this project, the best-case scenario’s Net Present value of this project is $0. For the most likely case scenario the NPV Running head: SOUND ADVICE is $425,00.00 and -$121,00.00 for the almost worst-case scenario. In the worst-case scenario the NPV negative number increase to -$135,000.00. Best Case Turntable Project Net Present Value Scenario Probability Car Audio Project Net Present Value Scenario Probabiltiy $500,000.00 Most Likely Case $ Almost -Worst Case 210,000.00 Worst Case -$90,000.00 0.25 0.4 0.35 $315,000.00 $175,000.00 -$100,000.00 0.3 0.35 0.25 Noise Project Net Present Value $ 425,000.00 -$121,000.00 Scenario Probability 0.55 0.35 (this will be at the end and of course this is just me killing time at home) 0.10 -$135,000.00 0.10 (question 2) (Question 6) Will’s parents have been asking for investment advice. His mom’s company has recently offered to sell stock to senior employees at a discount from market value. She wondered if she should participate in the plan and how much should be tied up in the shares. His father’s concern was that he may be too conservative with his investments and whether his portfolio’s investments are properly balanced. There are investment funds that are based on age and risk tolerance. Age based funds are mutual funds in which the risk is higher at a younger age and more conservative the older you become. Target fund/lifestyle funds are based risk over time and your risk tolerance (Baldridge, n.d.). As we know Running head: SOUND ADVICE that higher risk can return higher returns, however, his parent may need to consider investing in a more conservative…. This is just random Stuff……. The IRR investment rule tells us that we should take the project which exceeds the opportunity cost of capital (Berk, 2017). We have chosen the …… based on the Net Present Value being rendering a higher monetary value. The value of the firm will increase by million. Different contexts of Risk A smaller company has a greater opportunity to grow than a larger company. In addition, they tend to have a lower stock price, therefore, price increase tends to be greater (Small Firm Affect, n.d.). Opportunities in small firms are more viable than in large firms. A small firm has the capabilities to test new products with nominal investments. A small firm is closer to their customers and is able to request and receive feedback on their new products (Gartenstein, 2018). the availability of external capital and the influence of public trading stock CAPM How and why is the process of risk analysis being different for an investor who was simply trying to determine which stocks to add to a well-diversified portfolio? How do capital asset model and other theories of investor behavior factor into the decision? Shareholders Cost and benefits of the shareholder’s current position (portfolio not diversified). Employees should consider…….. when voting to change the way the firm’s income is distributed. Furthermore, employees should think about…… (between different types of outside investment and equity at sound products) When allocating their own portfolio. Investment decisions based on age Conclusion Running head: SOUND ADVICE Through careful analysis out of the three products, Sound Advice has been looking to put noise product on the market. We feel that it will be the best choice for the company to go due to the financial data and the minimal stand-alone risk compared to the other two projects.
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