Table of Contents

Introduction .................................................................................. 12
1. Forecasting Techniques ............................................................. 12
2. Management information systems ............................................ 27
3. Inventory control ....................................................................... 28
4. Material requirements planning ................................................ 31
5. Project planning ......................................................................... 35
6. Investment appraisal techniques........................................... 37
Conclusion ..................................................................................... 38
Reference..................................................................................... 38

11

Introduction
iViet Technology Company is an emerging IT firm manufactures iViet brand
personal and laptop computers in Da Nang industrial park. Founded by young
Vietnamese entrepreneurs in 2000, the company exclusively exports its products to
foreign market such as Europe, America, Japan, Southeast Asia and other parts of
the world.
The components used in manufacturing iViet computers such as processor,
hard disk, main-board, power supply unit, DVD drives, and memory cards are
outsourced from a number of suppliers in China, Taiwan and ASEAN countries and
shipped to iViet plant by air freight, Only personal computer casings are produced
locally.
To make iViet Technology Company has a better result in business, iViet
should do some activities about forecasting techniques, management information
systems, inventory control, material requirements planning, project plan and
investment appraisal techniques. Therefore, these tools will help iviet Technology
Company can operate effectively and success.
1. Forecasting technologies
Sales forecast for 2010 can be make base on the quarterly sales data, in
thousands units, from 200 to 2009. The data are provided as follow:
2005

2006

2007

2008

2009

Quarter 1

48

52

54

50

55

Quarter 2

46

48

55

54

50

Quarter 3

27

32

42

37

36

Quarter 4

45

50

52

46

50

The additive model and the proportional model and also least square
regression method which we will use to make a time series analysis of the data and
forecasts for the budget year 2010.

12

 Least square regression method.

Year

Quarter

No (X)

2005

Sales (Y)

1
2
3
4
1
2
3
4
1
2
3
4
1
2
3
4
1
2
3
4

2006

2007

2008

2009

0
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19

48,000
46,000
27,000
45,000
52,000
48,000
32,000
50,000
54,000
55,000
42,000
52,000
50,000
54,000
37,000
46,000
55,000
50,000
36,000
50,000

60000
y = 235.34x + 43979
R = 0.0311

50000
40000
30000

Series1

20000

Linear (Series1)

10000
0
0

10

15

20

25

Finding the equation of a straight line:

The b =
The a =

= 43979

= 235.34x

The equation of straight line is: y = 235.34x + 43979

13

The equation of a straight line has a form y = 235.34x + 43979, where x = 0 in the
first quarter of 2005, and y(0)= 48,000. Using this trend line, we can predict sales in
2010 as the following table.
Year

Quarter

Year No. (X)

Thousand unit (Y)

2010

Quarter 1

20

48,300

Quarter 2

21

48,650

Quarter 3

22

49,000

Quarter 4

23

49,350
195,300

total

Time series and forecasts sale for 2010

60000
50000
40000
30000
20000
10000
0
1

9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24

14

 Sales forecasts for 2010 by using additive model:

Year

2005

2006

2007

2008

2009

Quarter

No

Sales

Moving
Average
4

Moving
Average
2

S=Y-T

Trend
(Regession)

S=Y-T

48,000

44,214

3,786

46,000

44,450

1,550

27,000

41,500

42,000

-15,000

45,000

42,500

42,750

2,250

17,685
44,920
80

52,000

43,000

43,625

8,375

45,156

6,844

48,000

44,250

44,875

3,125

45,391

2,609

32,000

45,500

45,750

-13,750

45,626

50,000

46,000

46,875

3,125

13,626
45,862 4,138

54,000

47,750

49,000

5,000

46,097

7,903

55,000

50,250

50,500

4,500

46,332

8,668

10

42,000

50,750

50,250

-8,250

46,568

-4,568

11

52,000

49,750

49,625

2,375

46,803

5,197

12

50,000

49,500

48,875

1,125

47,038

2,962

13

54,000

48,250

47,500

6,500

47,274

6,726

14

37,000

46,750

47,375

-10,375

47,509

15

46,000

48,000

47,500

-1,500

10,509
47,744 -1,744

16

55,000

47,000

46,875

8,125

47,980

7,020

17

50,000

46,750

47,250

2,750

48,215

1,785

18

36,000

47,750

19

50,000

15

44,685

48,450

12,450
48,686 1,314

From outcome above, the summary of seasonal variation as the table below:
Year
2005
2006
2007
2008
2009
Average
Adjustment so
sum is zero
Adjustments

Quarter 1

Quarter 2

8,375
5,000
1,125
8,125
5,656
102

3,125
4,500
6,500
2,750
4,219
102

5,758

4,320

Quarter 3
-15,000
-13,750
-8,250
-10,375

Quarter 4
2,250
3,125
2,375
-1,500

Residual

-11,844
102

1,563
102

-406
406

-11,742

1,664

Final estimate of average quarter variation might be rounded up and down as follows:
Q1

; Q2

; Q3

; Q4

Below is the table show the forecast of sales in 2010:

2010

Q1
Q2
Q3
Q4

Trend

Season

48,300
48,650
49,000
49,350
Total

5,758
4,320
-11,742
1,664

Forecast of actual sales (S+T)

(thousand units)
54,058
52,970
37,258
51,014
195,300

time series and forecasts sale for 2010 (additive

model)
60000
50000
40000
Series1

30000

Linear (Series1)

20000
10000
0
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24

16

 Sales forecasts for 2010 by using proportional model:

Year

2005

2006

2007

2008

2009

Quarter

1
2
3
4
1
2
3
4
1
2
3
4
1
2
3
4
1
2
3
4

No

0
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19

Sales

48,000
46,000
27,000
45,000
52,000
48,000
32,000
50,000
54,000
55,000
42,000
52,000
50,000
54,000
37,000
46,000
55,000
50,000
36,000
50,000

Moving Moving
Average Average
4
2

41,500
42,500
43,000
44,250
45,500
46,000
47,750
50,250
50,750
49,750
49,500
48,250
46,750
48,000
47,000
46,750
47,750

17

42,000
42,750
43,625
44,875
45,750
46,875
49,000
50,500
50,250
49,625
48,875
47,500
47,375
47,500
46,875
47,250

S=Y/T

64.29%
105.26%
119.20%
106.96%
69.95%
106.67%
110.20%
108.91%
83.58%
104.79%
102.30%
113.68%
78.10%
96.84%
117.33%
105.82%

Trend
(Regession)
44,214
44,450
44,685
44,920
45,156
45,391
45,626
45,862
46,097
46,332
46,568
46,803
47,038
47,274
47,509
47,744
47,980
48,215
48,450
48,686

S=Y/T

108.56%
103.49%
60.42%
100.18%
115.16%
105.75%
70.13%
109.02%
117.14%
118.71%
90.19%
111.10%
106.30%
114.23%
77.88%
96.35%
114.63%
103.70%
74.30%
102.70%

The summary of the seasonal variations expressed in proportional terms is as

follow:

2005
2006
2007
2008
2009
Average

Q1

Q2

119.20%
110.20%
102.30%
117.33%
112.26%

106.96%
108.91%
113.68%
105.82%
108.84%

Q3
64.29%
69.95%
83.58%
78.10%

Q4
105.26%
106.67%
104.79%
96.84%

Total

73.98%

103.39%

398.47%

Adjustment to reduce total

0.38%
0.38%
0.38%
0.38%
1.53%
variation to 400%
Final estimate of average 112.64% 109.23%
74.36%
103.77% 400.00%
variation
Rounding
113%
109%
74%
104%
400.00%
We can calculate the trend of the 4 quarters of 2010 base on the equation of straight
line: y = 235.34x + 43979. The result is presented as the table below:
2010

Q1
Q2
Q3
Q4

Trend
48,300
48,650
49,000
49,350
total

Season
113%
109%
74%
104%

Forecast of actual sales (S*T)

54,579
53,029
36,260
51,324
195,192

time series of forecasts for the budget 2010

60000
50000
40000
Series1

30000

Linear (Series1)

20000
10000
0
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24

18

REPORT
To: International Export Manager
From: Assistant Manager
Date: September 20th 2010
REPORT ABOUT FORECAST SALES FOR 2010
1.
2.
3.
4.

Executive summary
Methods of forecast
Findings
Recommendation

EXECUTIVE SUMMARY
As a result, this report will supply to information about sales forecasts for 2010
from quarterly sales data, in thousand units, from the past five years. In the report, it
is also include recommendations for the number of personal computers to be in
upcoming budget year, 2010, and using the threes methods: the least square
regression, the additive model and proportional model was requested by Miss Linh,
International Export Manager.
METHODS FORECASTS
The report has been compiled from three methods as follow:
Least squares regression method
Additive model
Proportional model
FIDINGSS
Sales forecasts for 2010 using the least square regression method.
Through calculated by the least square regression method, we can see the
number of personal computers increases regularly from the quarter 1 to quart 4 in
2010. Base on the trend line, the sales of personal computers in the first quarter of
year 2010 is about 48,300 (thousand units). Similarly, it continuously increase to
48,650 (thousand units) in the second quarter, 49,000(thousand units) in the third
quarter and 49,350 (thousand units) in the fourth quarter. The total sales is 195,300
(thousand units) in 2010.
Sales forecasts for 2010 using the additive model method
Through calculated by the additive model method (forecast = T+S), we can
see the sales of first quarter in 2010 is highest with 54,058 thousand units. The sales
of second and third quarter went down with 52,970 thousand units in second quarter
19

and 37,014 thousand units in third quarter. However, the sale of four quarter is
increase to 49,350 thousand units. In summarize, the total sales of the years 2010
are 195,300 thousand units.
Sales forecasts for 2010 using the proportional model method
Through calculated by the additive model method (forecast = T*S), we can
see the sales of first quarter in 2010 is highest with 54,579 thousand units. The sales
of second and third quarter are decrease with 53,029 thousand units in second
quarter and 36,260 thousand units in third quarter. However, the sale of four quarter
is increase to 51,324 thousand units. In summarize, the total sales of the year 2010
are 195,192 thousand units.
RECOMMANDATION
As a result, I think we should use the result of proportional model because it is
more practical. Based on the result of forecast sales for 2010, company should
manufacture the quantity of products for 2010 equal to products quantity forecasted.
It helps the company save budget and production wastefully. The quantity of
products are manufactured which is up to quarters such as Q1 is 54,579 thousand
units, Q2 is 53,029 thousand units, Q3 is 36,260 thousand units, Q4 is 51,424
thousand units.
In order to disseminate information effectively and persuasively to Mss Linh
and the management team, I make business presentation as follow:

20

Sales forecast for 2010

Report
Methods forecasting
Findings
Recommendation

21

Requested by Miss Linh, International Export

manager
Forecasting methods
Forecasting the sales for 2010 for iViet
Technology Company base on the sales data
from the past five years
Conclusion draw from the forecasting result

Least squares regression method

Addition model
Multiplicative or Proportional model

22

Year

Quarter

Year No. (X)

Thousand unit (Y)

2010

Quarter 1

20

48,300

Quarter 2

21

48,650

Quarter 3

22

49,000

Quarter 4

23

49,350
195,300

total

The sales of 2010 is raise gradually from Q1 to Q4. the total sales of
2010 is 195,300

Time series and forecasts sale for 2010

60000

50000

40000

30000

20000

10000

0
1

10

11

12

13

14

15

23

16

17

18

19

20

21

22

23

24

2010

Trend

Season

Q1

48,300

5,758

Forecast of actual sales

(S+T)
(thousand units)
54,058

Q2

48,650

4,320

52,970

Q3

49,000

-11,742

37,258

Q4

49,350

1,664

51,014

Total

195,300

The sales in the third is lower than other quarter of 2010. the sales
in the first quarter is highest with 54,058 thousand units

time series and forecasts sale for 2010 (additive model)

60000

50000

40000

30000

Series1
Linear (Series1)

20000

10000

0
1

10 11 12 13 14 15 16 17 18 19 20 21 22 23 24

24

Trend
2010

Q1

48,300

113%

Forecast of actual
sales (S*T)
54,579

Q2

48,650

109%

53,029

Q3

49,000

74%

36,260

49,350

104%

Q4

Season

total

51,324
195,192

We can see that the first and second quarter 2010 have increase
compare with 2009. the third quarter of 2010 is decrease with 36,260
thousand units. However, the four quarter is increase with 51,324
thousand units.

25

time series of forecasts for the budget 2010

60000

50000

40000

30000

Series1
Linear (Series1)

20000

10000

0
1

10 11 12 13 14 15 16 17 18 19 20 21 22 23 24

I think iViet Technology Company should use proportional

model method to forecast the sales of 2010. Proportional
model is based on percentage so it may be more practical,
because percentage can be change up to data. For additive
model, seasonal is based on constant numbers so
proportional model is more practical and exactly.

26

2. Management Information Systems

iViet Technology Company is expanding its exports, there are an urgent need for
effective cooperation among business departments within the firm. iViet Technology
Company usually share all information between departments production,
marketing, finance and accounting, export using paper passed memorandum
and reports. To management information system, the company connected with Local
Area Network (Lan), but it just work merely for printing and sending emails.
Therefore, the company needs to apply some management information systems
which helps iViet can work effectively within the organization as well as with external
parties.
Transaction processing system (TPS) which used for routine tasks in which data
items or transactions must be processed so that operations can continue. TPS will
process transactions using either batch processing or online processing. Batch
processing involves transactions being grouped and stored at regular intervals such
as daily, weekly or monthly. Therefore, this system will help employees can know the
works to do and results are done, so TPS will be suitable for operational level. In
addition, TPS will help iViet can easily process all activities into, within and out of the
business.
Decision support system (DSS) which combine data and analytical models or data
analysis tools to support semi-structured decision making. Analyses information
already captured by TPS and MIS in order to support unstructured decision making
at top management level. In addition, DSS can be use in both Strategic management
level and tactical management. For iViet Technology Company, Decision Support
Systems will help company can work effective in those functions.
Decision support system (DSS) can use in strategic management, but Executive
support systems (ESS) is more suitable in strategic management. Because ESS
can provide senior managers easy access to key internal and external information,
the system summaries and tracks strategically critical information, possibly draw
from internal MIS and DSS, but also including data from external sources such as
competitors, legislation, external databases such as Reuters. Beside that the
advantage of decision support system is flexibility, quick response time and
sophisticated data analysis and modeling tools.
When iViet Technology Company applies those systems, the information will shared
and connected between different departments will be become quickly and more
effective. In addition, utilizing appropriate Management Information Systems will help
iViet Company have a good the organization as well as with external parties.

27

3. Inventory Control
Based on the information given in the scenario, we have:
Demand (D)

180,000 components

Cost of ordering (Co)

Cost of holding (Ch)
Price (ac)
Working days

$600/order
10%*unit price
$75
310 days

The Economic Order Quantity (EOQ) is calculated base on this formula:

TMC4000=|

= 5,367 units

A negotiation process, Eastern Digital agreed to supply with the following volume
discount terms:
Order brand
4,000units or less
4,001 8,000
8,001 units or more

Units Price ($)

75
70
65

EOQ at the price $75 per unit:

EOQ$75=

(stop)

Because the EOQ>4000 units so we dont choose it.

EOQ at the price $70 per unit:
EOQ$70=

(accept)

Because 4000<EOQ<8000 so we keep it.

EOQ at the price $65 per units:
28

(Increase to 8001)

Because EOQ < 8001 units so we raise it to 8001

TMC at quantity = 5555 units:
TMC5555=|

TMC at quantity=8001 units:

TMC8001=|

From the results above, we choose the order quantity is 8001 or more units because
the TMC = $11,739,502 is minimized.
If we order (4000 8001) we can save:
The annual saving costs
= TMC4000 TMC8001= $13,542,200 - $11,739,502= $1,802,698
Order time cycle: OTC=
Finding optimized order size by using spreadsheet:
Quantity

4000
4100
4200
4300
4400
4500
4600
4700
4800
4900
5000
5100
5200
5300
5400
5500
5600
5700
5800

Number
of
orders

Ordering
costs

Discount

45.0
43.9
42.9
41.9
40.9
40.0
39.1
38.3
37.5
36.7
36.0
35.3
34.6
34.0
33.3
32.7
32.1
31.6
31.0

27,000
26,341
25,714
25,116
24,545
24,000
23,478
22,979
22,500
22,041
21,600
21,176
20,769
20,377
20,000
19,636
19,286
18,947
18,621

0
900,000
900,000
900,000
900,000
900,000
900,000
900,000
900,000
900,000
900,000
900,000
900,000
900,000
900,000
900,000
900,000
900,000
900,000

Purchases

13,500,000
12,600,000
12,600,000
12,600,000
12,600,000
12,600,000
12,600,000
12,600,000
12,600,000
12,600,000
12,600,000
12,600,000
12,600,000
12,600,000
12,600,000
12,600,000
12,600,000
12,600,000
12,600,000

29

Average
stored
quantity

2,000
2,050
2,100
2,150
2,200
2,250
2,300
2,350
2,400
2,450
2,500
2,550
2,600
2,650
2,700
2,750
2,800
2,850
2,900

Stock
holding
costs

Total

15,000
14,350
14,700
15,050
15,400
15,750
16,100
16,450
16,800
17,150
17,500
17,850
18,200
18,550
18,900
19,250
19,600
19,950
20,300

13,542,000
12,640,691
12,640,414
12,640,166
12,639,945
12,639,750
12,639,578
12,639,429
12,639,300
12,639,191
12,639,100
12,639,026
12,638,969
12,638,927
12,638,900
12,638,886
12,638,886
12,638,897
12,638,921

5900
6000
6100
6200
6300
6400
6500
6600
6700
6800
6900
7000
7100
7200
7300
7400
7500
7600
7700
7800
7900
8000
8001
8002
8100
8200

30.5
30.0
29.5
29.0
28.6
28.1
27.7
27.3
26.9
26.5
26.1
25.7
25.4
25.0
24.7
24.3
24.0
23.7
23.4
23.1
22.8
22.5
22.5
22.5
22.2
22.0

18,305
18,000
17,705
17,419
17,143
16,875
16,615
16,364
16,119
15,882
15,652
15,429
15,211
15,000
14,795
14,595
14,400
14,211
14,026
13,846
13,671
13,500
13,498
13,497
13,333
13,171

900,000
900,000
900,000
900,000
900,000
900,000
900,000
900,000
900,000
900,000
900,000
900,000
900,000
900,000
900,000
900,000
900,000
900,000
900,000
900,000
900,000
900,000
1,800,000
1,800,000
1,800,000
1,800,000

12,600,000
12,600,000
12,600,000
12,600,000
12,600,000
12,600,000
12,600,000
12,600,000
12,600,000
12,600,000
12,600,000
12,600,000
12,600,000
12,600,000
12,600,000
12,600,000
12,600,000
12,600,000
12,600,000
12,600,000
12,600,000
12,600,000
11,700,000
11,700,000
11,700,000
11,700,000

2,950
3,000
3,050
3,100
3,150
3,200
3,250
3,300
3,350
3,400
3,450
3,500
3,550
3,600
3,650
3,700
3,750
3,800
3,850
3,900
3,950
4,000
4,001
4,001
4,050
4,100

20,650
21,000
21,350
21,700
22,050
22,400
22,750
23,100
23,450
23,800
24,150
24,500
24,850
25,200
25,550
25,900
26,250
26,600
26,950
27,300
27,650
28,000
26,003
26,007
26,325
26,650

12,638,955
12,639,000
12,639,055
12,639,119
12,639,193
12,639,275
12,639,365
12,639,464
12,639,569
12,639,682
12,639,802
12,639,929
12,640,061
12,640,200
12,640,345
12,640,495
12,640,650
12,640,811
12,640,976
12,641,146
12,641,321
12,641,500
11,739,502
11,739,503
11,739,658
11,739,821

From spreadsheet we also found that the optimized order size is 8001 units because
it has minimum total cost.
Conclusion and recommendation:
As a result, we can see that if we order 4,000 units per order, it will cost us
$13,542,000. This is much higher the minimum total cost ($11,739,502) if we order
8001 units per order. Therefore, I think iViet Technology Company should order
8001 units per order with order cycle time= 13.78 days, because when we chose this
one, the total cost is minimized, so that the company can save money.

30

4. Material Requirements Planning

iViet has just received an urgent order of 600 PCs from China for Lunar new year
promotions, which has to be shipped in week 8. Therefore, to assist production
department director on material requirement planning, I will use MRP system may be
the best solution for iViet Company.
Materials requirement planning is a system that coverts a production schedule into
listing of the materials and components required to meet that schedule, so that
adequate stock levels are maintained and items are available when needed.
MRP for all components:
Week

PC (End Item)

Demand

100

100

100

100

100

100

Production

Hard Disk

Demand

500

Store

On Order

100

Planed

500

Order

500

DVD Drive

Demand

On Order

20
50

70

500

70

70

70

70

70

Planed

430

Order

430

31

600

100 -500

Store

Store

500

Connector

Demand

0 1000

On Order

Store
Planed

1000

Order

1000

Case Assembly

Demand

500

60

60

60

60

60

60

-440

Production

440

Case

Demand

440

Store

60

On Order
Store
Planed

440

Order

440

Power Supply

Demand

440

On Order
Store
Planed

440

Order

Screw

440

32

Demand

200

200

200

200

0 1760

On Order
Store

200

Planed

200

440

2000

Order

2000

Main Board Assembly

Demand

500

50

50

50

50

50

50

-450

Production

450

Main Board

Demand

450

On Order

40

Store

40

40

40

40

40

Store

50

Planed

410

Order

410

Memory

Demand

900

On Order
Store
Planed

900

Order

900

Processor

Demand

33

900

On Order
Store

60

60

60

60

Planed

60

60

840

Order

840

By using the MRP above, we have the ordering schedule as below:

Components
Hard-disk
Mainboard
Memory
Processor
Case
Power supply
Screw
DVD drive
Connector

Order size
500
410
900
840
440
440
2000
430
1000

Week
3
3
3
3
4
4
4
5
5

Hard disk: iViet Technology Company should be order about hard disk in
week 3
Main Broad: iViet company need to order 410 in week 3
Memory: iViet company need to order 900 in week 3
Processor: iViet company need to order 840 in week 3
Case, Power Supply and Screw: iViet Company need to order 440 Power
Supply, 440 Case and 2000 Screw in week 4
DVD Drive: iViet should be order about DVD drive in week 5 to enough the
number, so the company will have 430 products.
Connector: iViet Technology Company should be order 1000 in week 5
PC: as a result, we can see the stock has already 100PC (end item). The
demand is more 500 PC. The store has shipped 500 PC in week 8.
From material requirements planning, it has help iViet company can lists how much
inventory is already available and determining how much, if any, additional inventory
is needed to fulfill production orders. Furthermore, MRP will help iViet can set up
production times among the separate manufacturing stages and tracks the amount
of material that is demand of customers.

34

5. Project Planning
4d. Construct a network diagram and identify expected completion time a
critical path. Construct a Gantt chart for above project using appropriate
software for decision making purpose for the management.
Network diagram

The numbers are the expected durations in weeks:

Path
Time require (week)
Total (week(
B-C-D-E-F-G-H-I-K-L
3 + 2+1+1+5+2+2+1+1+1+4
22
B-C-D-E-F-G-H-J-K-L
3 + 2+1+1+5+2+2+1+1+1+4
22
As a result, we can see that critical path is two ways have similar the
durations is 22 weeks.
Time of activities:
Activity
B
C
D
E
F
G
H
I
J
L
K

Duration
3
2
1
1
5
2
2
1
1
1
4

35

The Gantt chart is constructed with reference to the earliest start times for each
activity, the duration of each activity and the number of staff required for each activity
thus:
Acti
vity
A
B
C
D
E
F
G
H
I
J
K
L

Dura
tion

1
1 2 3 4 5 6 7 8 9 0

1
1

1
2

1
3

1
4

1
5

1
6

1
7

1
8

1
9

2
0

2
1

2 We
2 ek

1
1 2 3 4 5 6 7 8 9 0

1
1

1
2

1
3

1
4

1
5

1
6

1
7

1
8

1
9

2
0

2
1

2 We
2 ek

1
3

1
4

1
5

2
3
2
1
1
5
2
2
1
1
1
4

1 2 3 4 5 6 7 8 9

1
0

1
1

1
2

1
6

1
7

1
8

1
9

2
0

2
1

2 Wee
2 k

A
B
C
D
E
F
G
H
I
J
K
L

Conclusion: from network diagram and Gantt chart, we can know that the time for
the project planning need to complete in 22 weeks.

36

6. Investment Appraisal Technology

4e. use finical tools NPV and IRR methods to evaluate the viability of the
proposed investments and make comments.
Project
Kuka

Nachi
Initial Cost
Expected Cash Flow:
End of Year 1
Year 2
Year 3
Year 4
Year 5

Rate
Initial Cost
Expected Cash Flow

$130,000

$150,000

$160,000

30,000
40,000
45,000
55,000
70,000

50,000
45,000
50,000
40,000
35,000

60,000
70,000
40,000
60,000
55,000

Nachi

Kuka

Motoman

(130,000)
30,000
40,000
45,000
55,000
70,000
22,170
21%

(150,000)
50,000
45,000
50,000
40,000
35,000
652
15%

(160,000)
60,000
70,000
40,000
60,000
55,000
33,055
24%

15%
Year 1
Year 2
Year 3
Year 4
Year 5

NPV
IRR

PV = S*

Motoman

NPV = PV

Where:
S is investment money
R is interest rate
N is year
Conclusion and recommendation:
As a result, I recommend that iViet Technology Company should invest in Motoman
because Motoman has the highest NPV ($33,055) and IRR 24%, so it will bring the
highest profit for the company when they invest in Motoman rather than Nachi and
KuKa.

37

CONCLUSION
From analysis and interpretation, we can see guess the quantity of sales for 2010 of
iViet Technology Company and help iViet prepare a suitable budget for production.
Management information systems will help iViet can easily share and exchange
information between departments. Inventory control will provide methods for iViet to
find out ideal order. Beside that material requirements planning will help iViet can set
up production times among the separate manufacturing stages and tracks the
amount of material that is demand of customers. iViet company will have more profit
from apply investment appraisal techniques.
Reference
EDEXCEL HNC&HND Business,(2004), Business Decision Making :Course Book,
1st edition BP Professional Education, London.
Management information systems
<http://tutor2u.net/business/ict/intro_information_system_types.htm> [September
18th 2011]
Material Requirements Planning
<http://www.askdeb.com/inventory-management/mrp/> [September 19th 2011]

38