Evaluation of Options for Newly Developed Technology

Running head: BUSINESS FINANCE
BUSINESS FINANCE
Name of the Student:
Name of the University:
Author’s Note:

1BUSINESS FINANCE
Table of Contents
Memo:..............................................................................................................................................2
Appendix:........................................................................................................................................6

2BUSINESS FINANCE
Memo:
MEMORANDUM
Date: 08 May 2019
To: The Board of Directors, MicroNet Technologies Ltd
From: Finance Officer
Subject: Evaluation of available options for the newly developed technology
Introduction:
The MicroNet Technologies Ltd has developed an improved and innovative technology
for driverless sports cars. It has spent 2.7 million to develop the technology and patenting it.
There are three possible options available to the company to utilize it. In this memorandum all
those three options have been evaluated with analysis of potential costs and profits.
Option A: Manufacturing the product In-House:
The technology is a newly developed and innovative technology. In the initial years there
will be less competitive pressures in the market and the company can easily sell the products at a
higher price in the market. Therefore, the company can use the patent for In-House production of
Cars and selling them into the market. For doing so variable and fixed manufacturing costs to be
incurred have been listed in the Table-A in the appendix. It has been assumed that, there will be
enough demand in the market and the price will be high in the initial years and later on the
demand will be decreased to 11,600 units and the price will fall to $25,000 per unit. The
manufacturing process will use the place which is currently earning 1.5 million as rent from
letting out, hence it has been considered as opportunity cost for the project. Taking into
consideration all those factors the net present value of the project has been computed to $ 157.1
million. The cost of developing the technology is 2.7 million, hence it evidenced that, the In-