Sai Simulation
Week 3 Simulation
Kristin Brantley
University of Phoenix
MBA 540
Jude
September 11, 2007
Week 3 Simulation
Silicon Arts Inc (SAI) is a manufacturer of digital imaging integrated circuits. These integrated circuits are used in digital cameras, DVD players, computers, and medical and scientific instruments. SAI has an annual sales turnover of $180 million and has sale territory in North America, Europe, and South East Asia. At the end of 2001, SAI was able to record growth in the last two quarters. SAI starts 2002 in a strong financial position with the intentions of pursuing growth plans in the next few years. SAI's Chairman Hal Eichner has set objectives of increasing market share while keeping pace with technology. SAI has the option of expanding its current existing digital imaging market share or entering the wireless communication market (Apollo Group, Inc, 2005). The simulation has cash flow projections and by analyzing the financial statements the best option will have the higher net present value (NPV), internal rate of return (IRR), and profitability index (PI).
Digital-imaging option proposal
The forecast for the digital imaging semiconductor market predicts a 20% growth in the market. The demand is expected to grow 7% annually from Year 2 through Year 5. After Year 5, it is expected for new technologies to take over the market. SAI plans to expand its current 18% of the global digital imaging semiconductor market by increasing its production base with the addition of a production plant in California. The life of the project is projected at five years and an expected 30% contribution to SAI's annual revenues. The capital outlay for the product is expected to be close to $40 million and the cost of capital is taken at 17% (Apollo Group, Inc, 2005).
Wireless-communication option proposal
If SAI enters the wireless communications market, it...
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