Critical Evaluation of Options for Product Launch: Space Sky Flight Ltd Analysis & Recommendation

Financial Management
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To,
Respected Sir
Space Sky Flight Ltd.
The present study is based on the critical evaluation and analysis of three options available to the
company for selecting one of three options that is the most suitable for the Space Sky Flight Ltd to
launch their product in the market. Morden, (2016) asserts that NPV is the central tool for using
time value of money in order to appraise long-term project. The specified method is applied to
analyze the profitability of any project and to assess the best option. Option A, is the most common
method which every company chooses to sell its product, the option of manufacturing in house and
selling the product directly into the market can be a strong way to gain more profits while
strengthening and controlling the brand effectively. It has been ascertained while assessing this
option that adequate initial cash out flow is require to implement option A. Further, option B i.e.
getting the product licensed and earn a royalty of $ per unit. The main key factor which are required
before accepting the above proposal are: the agreement of licensing involves the time frame deal
including, renewal, termination and all such contracts (Greco, Figueira, and Ehrgott, 2016). The last
option i.e. Option C is to sell the patent rights of the product. Initially the patent protection is filed.
Along with this, licensing another party also covers maintenance of copyrights, patents, or
trademarks. Patenting a product can result in a lengthy and costly process for the company and is
based primarily on the product’s complexity (Lewellen and Lewellen, 2016).
Recommendation:
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From above analysis company is recommended to adopt Option C, as the same is having highest
NPV. As per assertions of Hopkinson, 2017, net present value method is believed to be best
approach for taking decision relating to any investment. The reason behind same is that it is based
on estimated future cash flows. However, the company is recommended to consider other external
environment factor along with above analysis before taking final decision. Another, reason behind
choosing option C is that it will receive cash inflows more quickly in terms of year in comparison to
other options. Thus, due to same it could apply the funds to another project or accomplishing other
business goals.
Option A
STATEMENT PRESENTING NET CASH INFLOW
Particular Amount
NPV of Cash Outflow $ 18,62,50,000.00
NPV of Total Cash Inflow $ 25,82,96,052.90
Net Cash Inflow (Total Cash Inflow – Total Cash Outflow) (Hopkinson, 2017) $ 7,20,46,052.90
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