Juniper, Palomino, and Stargazer Project. This Email

¶ … Juniper, Palomino, and Stargazer project. This email will analyze some of the data associated with these projects. Each of the projects has a different level of risk associated with them that include a low risk project, a medium risk project, and a higher risk project. All three of these projects are feasible in regards to the financial returns that are projected to be gained from the individual projects.

Projected Cash Flows

Juniper

Low Risk

Project Cost

Profit

Palomino

Medium Risk

Project Cost

Profit

Stargazer

High Risk

Estimated Cost

Profit

All three projects offer the organization a profit and each of these projects are feasible from a financial standpoint. Therefore the decision about which project to implement is dependent upon the merits of each project individual relative to the other two. Part of this decision will be objective and consider the potential profits; however there will also be a subjective component as well. If the decision was made on a financial basis alone, then the Stargazer project would provide the greatest profitability estimate. However, the level of risks associated with the projects must also be considered in terms of the risk profile and strategic ambitions for the company.

The breakeven point for all three projects based on the projections of cash flows has been calculated to be greater than one year and less than two years. It is not surprising that the largest return is to be found on the project with the highest risk associated with it. Although the risk of completing this project on time is high there are other factors that make this project appealing. For example, the product life is forecasted to be 7 years for this product which could offer the company a sustained return on their investment. Additionally, the project has already been mostly funded and only a portion of the project remains to be further funded. Although the project still requires more funding than the other two, the project already has a built in momentum that also makes the investment somewhat practical.

Furthermore, despite the fact that the riskiest project offers potentially the largest returns, there are also a number of strategically beneficial intangibles that it will provide the company. By being the first to market with an innovative product, the organization will be seen as a pioneer in this industry. Therefore, it is recommended that Stargazer project be pursued with all the resources that the company can afford. The organization can put their best managers and most qualified people on the project to improve the chances of success. They could also conduct a risk management plan to mitigate whatever risks are identified. This project makes the best sense both financially and strategically for the company.