Iskall Arno Inc. Case Study Solution
- Expand market eastward & southward
| Expand market eastward | Expand market southward | |
| Cash flows | $37.50 | $32.50 |
| Risk adjusted NPV | 11.07 | 8.43 |
| IRR | 21.4% | 18.8% |
| Factual project | No | No |
| Core competency | Yes | Yes |
| Internal potential | Yes | Yes |
| Project risk | Medium | Medium |
| Incremental risk | Medium | Low |
Both of the projects had been quantified, it is to notify that the eastward expansion had the potential to bring desirable profits to company than southward, eastward expansion project encompassed medium level of project & incremental risk, also sales were the core competency which couldn’t be avoided.
- New product line and new advertising campaign
| New product line | New advertising campaign | |
| Cash flows | 28.50 | 4.00 |
| Risk adjusted NPV | 7.88 | 0.58 |
| IRR | 20.5% | 16.2% |
| Factual project | No | Yes |
| Core competency | Yes | Yes |
| Internal potential | Yes | Yes |
| Project risk | Medium | Medium |
| Incremental risk | No | No |
Evidently, the new advertising campaign and new product line were quantified, and the cash flows for the advertising campaign were relatively more than new product line with the medium project risk.
- Theme park
| Theme park | |
| Cash flows | $134 |
| Risk adjusted NPV | 0.58 |
| IRR | 28.7% |
| Factual project | Yes |
| Core competency | Yes |
| Internal potential | Yes |
| Project risk | High |
| Incremental risk | High |
However, the cash flows were positive but the risk associated with the project were high considering number of reasons. It was a core competency of company to add value to the company by orienting their strategies.
Recommendation
After taking into account the necessary fundamental associated with each project, it could be recommended that the company should’ve expanded market eastward it would’ve gained maximum profit returns as the positive or higher NPV ensuring the feasibility of project in long run. Additionally, the risk related to the project were medium making it most viable amongst all proposed projects. The analysis of each projects in respect to the company competency in key project activity, associated level of risk and internal potential, this recommendation could be provided in order to avoid any inevitable situation and to maximize the profit return and market share through business expansion within limited budget..........
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