Investment Appraisal Under Uncertainty

2393 words 10 pages
Investment Appraisal under Uncertainty

Question a Internal Memo
Date: November 15, 2012

Subject: Investment report

To: Mr. Michael the Chief Engineer Mr. Richard the accountant Mrs. Rachel the economist
From: Alex the Managing Director

Hello, everyone, I would like to present an introduction and brief description of the investment project to you, and wish to make sense as much as possible. To begin with, this project is about creating an online-based business that specializes on consumer goods such as fashion garments, imported electronic products and food, nutrient products and many others like that. Generally speaking, all kinds of products have to be
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I believe you can do perfectly well and make all of us better of.

Michael: I do not want to say anymore to you but want to ask Mr. genius for help in terms of our IT issues. You know, the constructions and operations of online platform are extremely important to our whole business. We aim to initially launch a powerful and friendly used website in order to obtain strong competitiveness over other players. In other words, we must have the most excellent technical team and enable to guarantee the completion of huge volume of online transactions properly. I know you are the only best candidate for this job, please do not refuse me.

The Managing Director

Question b

After serious reflection and evaluation of your investment report, I'm afraid to say now I'm reluctant to invest. There are two reasons in my consideration.

First, frankly speaking, there are many potential risks of this investment project. To sum up, there are two main types of risks that associate with this project, the business/market risk, and the risk that arising from economy situations. The first one is easy to understand that there are many players in retailing business or online business in China, and the competitions are fierce, consequently, it is not very clear that whether the launch of our business could achieve the predicted outcomes. In addition, the particular business and regulation environment in mainland China might create substantial barriers


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