Risk Analysis On Investment Decision - Analyzing Capital Budget
Introduction
Silicon Arts Inc. (SAI) is a manufacture of digital imaging Integrated Circuits (IC) that are used in digital cameras, DVD players, computers, medical and scientific instrumentation. The major sales are in North America (70%), Europe (20%), and South East Asia (10%). This company annual sales turnover is $180 million. SAI grew rapidly in its first years due to the semiconductor industry boom. As the industry began to slow down, SAI watched its revenues fall by 40%. SAI survived the decrease in revenues by cutting costs and freezing capital expenses. Shrewdly, SAI continued its research and development efforts and developed the IC 1032, a specialized chip used in data embedded mobile phones (Scenario, 2008. University of Phoenix). Hal Eichner, SAI Chairman, has a two point strategy for the company; increase market share, and keep pace with technology by expanding the existing digital images market sharing and enter the wireless comminication market.
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