Investment Analysis in a New Hair Product Aroma Oil - Assignment Example

Consumer trend: buying smaller and proportionately more expensive packs. Consumer trend: buying smaller and proportionately more expensive packs. Brand loyalty: heavy promotion encourages consumer switching and hampers brand loyalty. Competitors: Spritz from Fructis, Procter & Gamble, L’Oreal group. Consumers: tend to shop for promotions and new products  The total initial investment for installation of Plant and Machinery to manufacture the AROMA hair oil is $ 150,000 and for working capital $50,000.

A total investment of $ 200,000 is required for activation of the project. The Operating Expenditure for the year is estimated at $ 1,573,988. The Production capacity of machinery is estimated at 250,000 bottles per month The present value of an initial investment of $ 200,000 invested at 3% at the end of the year will become $ 200000(1+0.03) = $ 206,000. The net return is $ 6,000 only as against $ 205,997 estimated as net profit for the first year after depreciation. The initial investment for installation of this project is $200,000 and its operational cost for one year is as $ 1,573,988.

The total cost comes to $1,773,988. The benefits from sales and operational activities are estimated at $ 1,809,985. This yields a net present value NPV of $ 35,997 which is 18% return on Investment. The return on a bank deposit is only 3% per annum whereas in this case, the return on investment is 18% within one single year. The return is very attractive and the scope of growth is very high. There also exist long-term benefits in terms of expansion and addition of new hair care products. It is therefore suggested that the investment for this venture is made for the benefits of all!