Analysis of Two Product Lines for Hitech Limited: A Capital Budgeting Approach

Running head: FINANCIAL MANAGEMENT
Financial Management
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1FINANCIAL MANAGEMENT
Executive Summary:
The current assignment intends to analyse the two product lines under consideration for
Hitech Limited to be manufactured in future so that its ability to generate revenue increases
significantly. The analysis is carried out by using different techniques of capital budgeting,
which is utilised to identify the financial feasibility of the two projects. The NPV of the
Neuroforce project is found to be negative with increase in the discount rate. Therefore,
adequate analysis of both the projects has been conducted, which signifies that Hitech
Limited should undertake the IQPOWER project. On the other hand, the NPV of the
Neuroforce project is only positive when the discount rate is 16%, which has minimised its
financial feasibility. Furthermore, the conduction of qualitative analysis reveals the same
scenario. This is because the Neuroforce project would have detrimental effects on the health
of the consumers in future, while the IQPOWER project is a safe traditional gaming console.
By considering all aspects, it is recommended to the project manager of Hitech Limited to
undertake the IQPOWER project so that the return on investment of the organisation could be
maximised.

2FINANCIAL MANAGEMENT
Table of Contents
1. Introduction:...........................................................................................................................3
2. Findings:.................................................................................................................................3
2.1 Quantitative analysis:.......................................................................................................3
2.2 Qualitative analysis:.........................................................................................................5
3. Recommendation and justifications:......................................................................................6
4. Detailed comparison and further recommendations:.............................................................6
5. Conclusion:............................................................................................................................7
References and Bibliographies:..................................................................................................9
Appendix:.................................................................................................................................11

3FINANCIAL MANAGEMENT
1. Introduction:
The current assignment intends to analyse the two product lines under consideration
for Hitech Limited to be manufactured in future so that its ability to generate revenue
increases significantly. The analysis is carried out by using different techniques of capital
budgeting, which is utilised to identify the financial feasibility of the two projects. Moreover,
considerable assessment of the qualitative analysis has been carried out to identify social
feasibility so that the project could be approved. Hitech Limited is involved in manufacturing
gaming consoles, which could have both favourable and adverse effects on the minds of the
users raising the societal concerns of the project manager at the time of undertaking
investment decisions. The project manager has asked for appropriate recommendations
supported by justifications, as the individual is planning to undertake one of the two projects
for the organisation. Accordingly, recommendations have been provided so that the project
manager could undertake sound investment decision by considering quantitative analysis as
well as qualitative analysis.
2. Findings:
2.1 Quantitative analysis:
In terms of quantitative analysis, the capital budgeting techniques that have been used
for evaluating the viability of the two projects include net present value (NPV), internal rate
of return (IRR) and discounted payback period method. The detailed calculations of these
techniques are represented in the form of tables (Refer to Appendix). Based on the
calculations, it could be witnessed that the IQPOWER project is acceptable, since it adheres
to the requirements of the organisation. This is because as per the provided information, the
organisation requires a minimum of 5 years as discounted payback period for project