Notes

This presentation provides a thorough examination of the investment decision to introduce a new smartwatch product by Bremont Watch Company Limited. The main topics addressed in this course are the computation of Weighted Average Cost of Capital (WACC), projected cash flow, Net Present Value (NPV), Payback Period (PP), and pricing strategy. According to the analysis, it is suggested to approve the project because it produces a positive Net Present Value (NPV) and satisfies the payback period requirement.

Summary

This paper provides a thorough financial analysis and investment evaluation of the smartwatch concept offered by Bremont Watch Company Limited. The study assesses the financial feasibility of the project, taking into account aspects such as anticipated cash flows, cost of capital, funding alternatives, and investment evaluation methods.

Main Discoveries:

Financial Performance: The forecasted cash flow analysis suggests a varied financial performance over the span of 5 years, with profitability in the early years followed by difficulties such as decreasing earnings and negative cash flows in subsequent years.
The investment appraisal of the project indicates its viability based on the Weighted Average Cost of Capital (WACC), Net Present Value (NPV), and Payback Period calculations. The project shows a positive NPV and a payback period that is acceptable within a timeframe of 5 years.
The cost of capital refers to the weighted average cost of capital (WACC), which takes into account both equity and debt components. It is used as a standard for assessing investment opportunities and represents the minimal return expected by investors.
Sources of funding: Long-term and short-term funding methods, such as equity and debt financing, have certain benefits and drawbacks that impact the project's capital structure and financial risk.
Suggestions:

Project continuance: Despite obstacles, the project's continuance is justified by its positive Net Present Value (NPV) and satisfactory payback period. Nevertheless, it is imperative to implement proactive management techniques and make strategic adjustments in order to effectively tackle profitability challenges and maintain a steady cash flow.
Optimisation tactics: Employ cost optimisation tactics to reduce expenses, improve operational efficiency, and investigate potential for diversifying revenue in order to ensure long-term viability.
Capital Structure Management: Achieve a well-balanced capital structure by optimising the combination of equity and debt financing in order to minimise the overall cost of capital and assure financial stability.
Risk Management: Take proactive measures to identify and minimise operational, market, and financial risks in order to protect project profitability and ensure sustained performance.
Ultimately, the smartwatch project has potential for generating income. However, it is crucial to make strategic decisions, manage risks, and continuously evaluate the project in order to overcome hurdles and maximise financial performance for long-term success.