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Mgt115 Point of View - Sunrise Bank

Essay by   •  January 26, 2011  •  Essay  •  385 Words (2 Pages)  •  1,361 Views

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I. Point of View

We decided to take the point of view of Mr. Ric de Ramos in solving this case because he will be the person in hand of the task of evaluating the viability of the investment. Also he is the investment analyst of the Sunrise Bank, meaning he has enough knowledge to interpret all the financial figures presented to him and determine if the investment is acceptable or not base on the presented data. The decision of Mr. Sintad is base on the outcome of his study regarding the commercial viability of the invention of Mr. Mario Manda.

II. Major Problem

III. Case Facts

Mr. Ric de Ramos, the investment analyst of the Sunrise Bank, is tasked by the president of the bank, Mr. Edgar Sintad, to evaluate the commercial viability of investing in the invention of his close friend, Mr. Mario Manda. Mr. Sintad presented Mr. De Ramos the possible cost and expenses of the project and also its income statement that will be helpful for Mr. Sintad in the evaluation of the project. The decision of the president on whether to invest in the invention or not is base on the outcome/result of the evaluation that will be done by Mr. Ric de Ramos.

IV. Alternative Course of Action

Alternative 1:

Alternative 2: Suggest to reject the idea of investing in the invention of Mr. Mario Manda if the result of the evaluation is not consistent to the objective of finance that is to maximize owner's wealth.

Pros: You can avoid the possible decrease in wealth of the firm and also less risk in investing in a negative NPV or low IRR.

Cons: There is a possibility that the information presented regarding the invention is not complete.That knowing all the information regarding the invention will make the investment acceptible or increase NPV and IRR.

Alternative 3: Start in renting first of equipment and building

Pros: Since this is just a new invention and we do not have the assurance that it will be successful in the long run, just renting of equipment and building in the first period of the operation may be possible in order to decrease the costs of the project making it acceptible for investment.

Cons: There would be less control in the production and also added problem if experience some disfunctions of the machines.

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