Project Evaluation of Defense Electronics, Inc

Defense Electronics, Inc. |

Para: | Chief Executive Officer |

De: | |

CC: | [Nombres de destinatarios] |

Fecha: | 11/04/2014 |

Re: | Project Evaluation of Defense Electronics, Inc |

Comentarios: | After analyzing the project of setting up a manufacturing plant overseas to produce a new line of RDSs, we consider all the flotation costs, taxes, to present the more accurate numbers for the project; we came that the result for the Net present value is of $14,130,713.81 which in the five years of the project will have an operating cash flow of $14,531,250 and a discount rate of 13.97%. The NPV tell us that we will increase the value of the company by $14,130,713.81increasing shareholders wealth. If the best we can do is reinvest cash flows at the cost of capital, the NPV assumed to be the project cost of capital, we would evaluate the project on the basis of the NPV and select the one that maximizes owners ‘wealth. The IRR does not incorporate environmental factors, it is an indicator of the efficiency, quality, or yield of an investment and because it is above the discount rate, it means that the project can be affordable and profitable at the end of year 5. Taking in consideration all the information presented for the project to set up the manufacturing plan in a five year project, it should be accepted because it is a profitable project and also, presenting this numbers to future investors can be attractive because it will maximize their wealth and at the end they will invest on it. |