Preview

Scor-Estore Case Writeup

Good Essays
Open Document
Open Document
864 Words
Grammar
Grammar
Plagiarism
Plagiarism
Writing
Writing
Score
Score
Scor-Estore Case Writeup
Value of Four Ideas:
Please see Exhibit-1 for just option prior to Lance Bernard meeting his friends. If the company is successful, he would get an end value of $68.5K for an investment of $90K with a net loss of ($21.5K).
Please see the Exhibit-2 for application of Real Options in this scenario, there are at least 4 other ways this can evaluated as profitable opportunity. 1. Viewer is Functional and Website is a success: This is highly profitable if this is accomplished. The return will be $500K. Discounting it at 20%, it will be $456K. Net Gain will be = $456 - $90K = $366K 2. Viewer is Functional but Website is failure: If the website is a failure, exploring further the option of abandoning the website and sell the software. It takes $25K to shrink-wrap the software and develop a sell version. The software can be sold for $450K. Lance Bernard’s share will be $125K, discounting at 20% it will be $114K. The net gain will be $114K - $90K = $24K 3. Viewer is Non-Functional but Website is a Winner: In this case, the business could switch to a license of an alternate viewer. Assuming the website can be sold to the owner of other viewer, the business could get $300K for the sale. Lance Bernard’s share will be $100K. Discounting it at 20% it will be $91K. The net gain will be $91K - $90K = $1K. 4. Expanding the website with additional capabilities: Expanding the website with additional capabilities to composers, website can earn free copies of other works or royalties. This additional capability could take additional 6 months, and $450K in investment. Lance Bernard will put one third of this amount. This will turn the company into profitability and will be valued much higher.
Just considering the first three options above and calculating their net additional value, it will be $27.5K. Comparing with the original opportunity and Lance Bernard’s initial loss of $21.5K, the above three ideas have increased the value of the opportunity by $49K.

Other

You May Also Find These Documents Helpful

  • Satisfactory Essays

    QRB501 Week 5 CAse Study

    • 367 Words
    • 2 Pages

    Our company has $250,000 to spend on acquiring either Corporation A or Corporation B. In determining which Corporation would be the better buy we will look at the Net Present Value (year 1 through 5) of both Corporations, determine the Internal Rate of Return, and conduct an analysis of the information gathered.…

    • 367 Words
    • 2 Pages
    Satisfactory Essays
  • Better Essays

    Midterm Comm293

    • 5099 Words
    • 21 Pages

    No programmable calculators are permitted. Please show all calculations in an orderly and clear format for part marks. Time management is crucial. Be sure to attempt each question. No questions will be permitted during this examination. If you need to make an assumption, state it and continue. Read the questions carefully before making any assumptions. Question 1 (18 marks; suggested time 18 minutes) Revenue Recognition…

    • 5099 Words
    • 21 Pages
    Better Essays
  • Good Essays

    Nt1330 Unit 4

    • 4542 Words
    • 19 Pages

    The second project would be the development of a new product which could produce the following net profits after the end of the project:…

    • 4542 Words
    • 19 Pages
    Good Essays
  • Good Essays

    7) Based on our suggestion, the business value for the possible auction is $8,324,026 which is the median number of all our business valuation number. The total assets for the company is above $4.8 million and the company doesn’t have much liability. We believe that based on the company’s good performance these years, the company can develop more business value and sell for better price.…

    • 659 Words
    • 3 Pages
    Good Essays
  • Satisfactory Essays

    week five for ops 571

    • 639 Words
    • 2 Pages

    According to the project descriptions, $450,000 has been spent on the product and they average a total of $575,000 being spent in order to bring the product to the market. Even though the dollar amount spent in this project is high, the return on investment for this project is high; by the third year the product is forecasted to have a return of investments of $750,000. The product life of this project is forecasted to be 7 years. Because this product has not been used we would be the first company to launch the product to the market which would create an innovative style allowing our company to be the leader in the industry.…

    • 639 Words
    • 2 Pages
    Satisfactory Essays
  • Better Essays

    Cindy wants to invest in a new business that involves the installation of solar panels. In order to make an informed decision on this business venture, she will need to review potential profit/loss in the solar panel industry by considering future prospects for this type of business. Cindy also needs to decide whether she will invest her own funds or borrow the money to start the business.…

    • 854 Words
    • 3 Pages
    Better Essays
  • Good Essays

    BUS 640 Week 4 Problems

    • 718 Words
    • 3 Pages

    (ii) What profit do you expect that the firm will make in the first year?…

    • 718 Words
    • 3 Pages
    Good Essays
  • Good Essays

    Overall Net Present

    • 621 Words
    • 3 Pages

    The Present Value of the expected after-tax cash profits are $47.235 million dollars. Calculations are listed below:…

    • 621 Words
    • 3 Pages
    Good Essays
  • Good Essays

    Home Computer FASB

    • 1138 Words
    • 5 Pages

    • The company estimates future cash flows from the video monitor operations will be $3.5 million during the 10-month phase-out period. The present value of these cash flows, discounted at a rate commensurate with the risk involved, is $3.2 million, which represents management’s estimate of the fair value of the equipment and special interior building configuration assets.…

    • 1138 Words
    • 5 Pages
    Good Essays
  • Good Essays

    Iowa Speedway

    • 299 Words
    • 2 Pages

    With Operating expensed of 15 milion , profit margin of 0.9% is very low. It’s doesn’t seems very lucrative to the investors. Therefore, in order to it to more profitable, the operating expense can be reduced from 15 million (expected) to an amount wherein profit margin can be increased to a respectable figure. This is not turn away the investors.…

    • 299 Words
    • 2 Pages
    Good Essays
  • Good Essays

    The need for oil and gas to be drilled on American soil is growing. The need for oil and well rigging and oil riggers increases daily. Despite being an extremely dangerous field to go into, oil rigging is a sought after job. As the popularity of oil rigging increases, the danger of doing so will increase as well and the concern for those working with oil welling rises.…

    • 424 Words
    • 2 Pages
    Good Essays
  • Satisfactory Essays

    Manzana Case Study

    • 1199 Words
    • 5 Pages

    Annualized Premium revenue of RUN are $6724 average in 1991, $5706 average in 1989 and $6101 average in 1990 while RERUN are $6205 in 1991, $5130 in 1989 and $5630 in 1990.…

    • 1199 Words
    • 5 Pages
    Satisfactory Essays
  • Satisfactory Essays

    CMR Enterprises

    • 434 Words
    • 2 Pages

    At Price 1 CRM is losing $3,447.72xvii. If CRM increases to Price 2 then they will capture a profit of $61,164.49xviii.…

    • 434 Words
    • 2 Pages
    Satisfactory Essays
  • Good Essays

    According to the case, Bernard’s value of original opportunity was $68.465K. Subtracted by the initial investment of $90K, the NPV was $21.535K. Thus, he planned to pass the opportunity. But his friends offered him alternatives which may generate positive outcomes to the project. With no options to either expand or buyout or both, if the viewer would be functional and website would be a winner, Bernard could make NPV= $366.44K by selling the business in six months. If the viewer were competitively functional in four months, but the website failed, Bernard would abandon the Web business and sell technology. He would add $25,000 of his money to turn the viewer into a shrink-wrapped software product. The selling price would be $450K and he would get a third of that. After being discounted to present, NPV would be $24.11K. He would have to sell the web business if the viewer was not functional and the website was successful. Bernard could get a third of the selling price of $300K which equaled $100K in six months. The NPV would be $1.29K. If both fail, eh would lose $90K in total. We’ve known…

    • 537 Words
    • 3 Pages
    Good Essays
  • Good Essays

    FINA0301 Tutorial

    • 628 Words
    • 8 Pages

    Finally, we subtract the cost of covering the short position from our initial proceeds to…

    • 628 Words
    • 8 Pages
    Good Essays

Related Topics