Premium Essay

Brilux Memo and Report

In: Business and Management

Submitted By
Words 1396
Pages 6
FOT-320 | R&D Investment Decision | Memo to Claude Boucher – Director of Research and Development | In recent months, Brilux customers have hinted that combining ARTRAN, our flagship optical data service platform, with a new fibre optic transportation product would increase the market appeal of the Brilux portfolio. The investment required to bring this product (tentatively dubbed FOT-320) to market is still uncertain but clearly represents a major investment. Moreover, developing FOT-320 will tie up valuable human resources for twelve to eighteen months. . This memo attempts to provide numerical analysis of the variables associated with development costs and projected sales revenue to support a decision.Using the data given, we have built a simulation model that takes into account all of the variables and their uncertainty. The model predicts, using randomly generated values of the uncertainties, a cost of development and production (including the chance of failed customer testing) and a revenue volume (if the simulation leads to commercialization). These two amounts are compared and if the revenues (in 2002 dollars) are greater or equal to the costs, the simulation is deemed to favour the investment in developing FOT-320.The results of ten thousand such simulations were tabulated and the data indicates a 55% likelihood of successful return on investment (20% ROI, pre-tax). Our recommendation, then, is to invest the capital and resources necessary to develop FOT-320. The recommendation is further detailed in the attached report. | Drafted by: Charles Gagnon, Magnificent 7 Decision Science Consultancy |

FOT-320
Incomplete Analysis: Missing Data Evaluated on its merits alone, the FOT-320 decision is well supported by the data provided.
However, given the significant costs involved in a failed FOT-320 investment (money and resources) we...

Similar Documents