Risk Analysis
Risk Analysis on Investment Decision
Silicon Arts, Inc (SAI) is a manufacturer of digital imaging integrated Circuits. The circuits are used in digital cameras, DVD players, computers, and other digital equipment. Which were sold in North America, Europe, and South East Asia earning SAI annual sales of $180 million. After a slowdown in 2001, SAI's research and development departments developed a specialized chip used in mobile phones. This chip has helped SAI to enter 2002 with a strong financial position and growth plan.
"SAI wants to increase market share and keep up with technology, which can be done by either expanding their existing Digital Imaging market share or by entering the wireless communication market." (UOP, 2005). This paper will help to analysis the risk of the investment decision SAI is trying to decide.
The Silicon Arts simulation provided an overview of a company trying to make choices between two cash flows for future business investments. The simulation analyzed cash flows using the ratios of Net Present Value [NPV], Internal Rate of Return [IRR], and Profitability Index [PI]. However, there were also other factors that needed further analysis such as expected risks by the type of volume expected for production and a new plant launch as well. The scenario was a good overview of the concepts and showed the types of decisions Silicon Arts needed to make to turn around their business from the 40% slowdown in the electronics industry.
The whole analysis was centered on an ROI calculation for each option. "Performing an ROI analysis allows your organization to evaluate strengths and weaknesses withinÂ…, so that it will remain competitive in the market" (AIIM E-DOC, CH 4, PARA 3). The scenarios took into account the NPV, and although not specified, I made an assumption they......
Introduction
Silicon Arts Inc. (SAI) is a manufacture of digital imaging Integrated Circuits (IC) that are used in digital...
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