Project an Involves Adding a New Component to the Car’s Emission Control System. At First It Will Only Be Available For Ford Automobiles And Then It Will Be Available For Other Models. Because Of Its Potential Axis May Have To Compete With New Entrants Seeking To Manufacture And Market a Similar Product.

Project b Is a Special Air Conditioning Adapter For Older Ford And Gm Automobiles. It Will Have An Immediate Market In China, Although New Ford And Gm Cars Will Come With This Item As Standard Equipment. Many Chinese Customers Desire American Automobiles But Cannot Afford The Sticker Price On Newer Models.

Axis Corporation is planning for business expansion with investment in new projects manufacturing new and advanced spares for motor vehicle. The company is having two potential projects to be opted one is manufacturing of a new component to the emission control system of cars and the other is the manufacturing of air conditioning adaptor for the Ford and GM automobiles. In this report both the investment projects have been evaluated and analyzed with the help capital budgeting and investment appraisal techniques to help in selecting the most feasible investment option.

Product staff of the company have estimated the expected demand for the products and revenue arising from them for the next three years. It has been further estimated that, cost of goods sold would be 60% of the sales revenue. Therefore, before selecting an investment proposal from the available projects, the profitability and feasibility of the projects must be evaluated and analyzed. With the estimation of straight line depreciation, 30% tax rate and 14% discounting rate, following investment appraisal techniques can be applied for evaluation of the projects.

Project A requires and initial investment of $120,000 with and expected life of 3 years. With the expected sales revenue as estimated by the production staff, following analysis can be made.