Capital Budgeting Techniques for Feasibility of a Project: Booli Electronics Case Study

Running head: BUSINESS FINANCE
Business Finance
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1BUSINESS FINANCE
Executive Summary:
The current report would intend to evaluate the feasibility of a particular project by using
the various capital budgeting techniques. Booli Electronics is the chosen organisation in
accordance with the provided case study and it is identified as a manufacturer of electronic
products in Carlton, Victoria, Australia. It has been assessed that the new SSHA would be highly
profitable for Booli Electronics, as the return on investment would be maximised. This is
validated by using the several investment appraisal techniques like payback period, internal rate
of return, profitability index and net present value. Even the sensitivity analysis conducted
implies that the organisation could make profits from the implementation of this new model.
However, it needs to take into consideration the market demand and other models, as any change
in these two aspects might have significant impact on the business profitability of Booli
Electronics.

2BUSINESS FINANCE
Table of Contents
Introduction:....................................................................................................................................3
1. Non-discounted payback period of the project:...........................................................................3
2. Profitability index of the project:.................................................................................................5
3. Internal rate of return of the project:............................................................................................5
4. Net present value of the project:..................................................................................................5
5. Sensitivity in NPV with change in price:....................................................................................6
6. Sensitivity in NPV with change in quantity sold:........................................................................9
7. Feasibility of the new SSHA:....................................................................................................12
8. Discussion of whether sales would be lost in other models due to the introduction of the new
SSHA:............................................................................................................................................12
Conclusion:....................................................................................................................................12
References:....................................................................................................................................14

3BUSINESS FINANCE
Introduction:
The current report would intend to evaluate the feasibility of a particular project by using
the various capital budgeting techniques. Booli Electronics is the chosen organisation in
accordance with the provided case study and it is identified as a manufacturer of electronic
products in Carlton, Victoria, Australia. It has been further observed that the organisation
generates maximum amount of revenue from a particular item, which is smart speaker and home
assistant (SSHA). However, with the rapid advancements in technology, the prototype used to
manufacture this item has become obsolete. Therefore, it mandates the need for the organisation
to develop a new one for which it has estimated the revenues to be earned and expenses to be
incurred. For critical evaluation of the project viability, this report would shed light on the
various techniques of capital budgeting to undertake the investment decision in the context of
Booli Electronics.
1. Non-discounted payback period of the project:
For arriving at the non-discounted payback period and other techniques of capital
budgeting mentioned below, the following computations are made: