Financial Management. Active Incention project for VNA


Seminar Paper, 2011

17 Pages, Grade: 1.3


Excerpt

Table of Contents

Executive Summary

List of Abbreviations

List of Figures

List of Tables

1. Project definition

2. Assumptions

3. Sales forecast

4. Operational cash flow and NPV calculation
4.1. FSLP option only
4.2. FSLP option and supplementary VNA Hardware

5. Conclusion

Appendix

Executive Summary

The project is about a software development for active load and source pull measurements. The measurement technique for vector network analyzers, firstly presented at the European Microwave conference in 2002 in Milan, Italy, allows to do fundamental device characterization of transistors and amplifiers in a non 50 ohm environment without the need for passive impedance tuners by simply utilizing two independent sources of a vector network analyzer. Up to now, only hybrid systems, combinations of active and passive impedance tuners, are realized to perform such measurements. The aim of the project is to develop a purely active system with known limitations in terms of power firstly and with the goal to gain knowledge and inputs for further developments secondly.

The considerations of this paper are dealing with expected forecast numbers for the software option and additionally sold vector network analyzer hardware in order to calculate the cash flow and the net present value of the project. Additionally the costs of goods sold plus maintenance and service costs are considered. For the expected project time, 5 years plus 6 month of development, the project related income statement is given together with a balance sheet.

The conclusion of the development proposal is to accept the project due to a positive net present value and mainly due to the strategic importance for further vector network analyzer developments and an increased company reputation in the market.

List of Abbreviations

illustration not visible in this excerpt

List of Figures

Figure 1: 5 year sales forecast for FSLP option and related additional new VNAs

Figure 2: 5 year sales forecast - revenue and operational cash flow for FSLP option only

Figure 3: 5 year sales forecast – total revenue and operational cash flow for FSLP option and additional VNA HW

Figure 4: 5 year operational cash flow for FSLP option and additional VNA HW with a price and cost variation of +/- 20%

List of Tables

Table 1: Calculation of operational cash flow

Table 2: Interest rate r for the project based on CAPM

Table 3: Max and min NPV value for +/- 20% price and cost variation of VNA HW

Table 4: Operational cash flow values for +/- 20% price and cost variation of VNA HW

Table 5: Project related income statement (without development time)

Table 6: Project related balance sheet (without development time)

1. Project definition

The project is about software (SW) development as add-on feature for new and existing vector network analyzers (VNA). The aim of this SW is to address fundamental source and load pull applications which are requiring in a conventional manner passive impedance tuners. The SW is performing fundamental source and load pull measurements by using an active injection approach which means the impedance mismatch for the device under test (DUT), conventionally generated by passive impedance tuners at the in- and output of the DUT, is synthesized by a reverse injected signal into the DUT presenting the aimed impedance mismatch for the DUT in terms of magnitude and phase[1].

The approach, commonly known as fast source and load pull (FSLP) method, is lowering measurement times and setup costs compared to the traditional method. The option utilizes the second source of a VNA which must be controlled in magnitude and phase compared to the first source and that allows fundamental impedances to be synthesized actively and as a result various source and load pull states can be calculated mathematically. The SW based method does not require any additional hardware (HW) by utilizing the full functionality of a VNA with two internal sources hence it saves money and is around 5 times faster than a comparable conventionally realized measurement setup with passive impedance tuners. As drawback, the limited power range of the DUT has to be accounted which must not exceed 2 watt with this approach and with respect to state of the art VNA capabilities while typical devices for this kind of measurement are starting at this power level.

The motivation for this application SW is to establish a new measurement method in the industry, aiming to become a standard in the future, and to gain knowledge for further VNA developments capable of dealing also with power requirements up to 10 or more watts. Due to the current power limitation of the FSLP approach low sales figures are to be expected.

2. Assumptions

The project evaluation assumes an development effort of 1 man-year and a medium risk complexity. As development time 6 month are planned and the costs are estimated with 150k€, equal corporate costs for 1 man-year, plus 50k€ for additionally HW required for the development. Further it is assumed that the project is financed without any debt. The project time is approximated with around 5 years in which the inflation rate is constant with 2 percent per year and all the costs and prices are adjusted accordingly. For the complete project time a constant corporate tax rate of 30% is accounted.

The sales price of the FSLP option is planned to be 10k€ and the costs for additionally sold HW is accounted with an average[2] of 100k€. On both products a general sales commission of 25% is given and 3% are accounted for maintenance and service. Further on, the considered COGS for the FSLP SW option are comparable low with 2 percent of the sales price, equal 200€, because besides creating an installation CD and printing a manual for the option no additional pieces or services are required. The costs for the VNA HW are accounted with 50 percent of the sales price per unit, equal 50k€ in average[3], due to expensive components mainly bought from third parties, due to assembly efforts and outsourced services like calibration of the instrument.

3. Sales forecast

As the FSLP method does not fully meet the market requirements in terms of power capabilities conservative forecast numbers are considered. Further on, the low estimates are supported by the fact that the method is not yet approved in this industry and can therefore only address a limited market. After market introduction one option is forecasted within the first 6 month, another 4 for the following six month. The expected sales numbers are increasing up to a maximum of 5 FSLP options per quarter in year 3 after the launch. Starting in year 4 the quantities are going down due to the market introduction of the next generation VNAs and a newly developed FSLP SW option. In addition to the FSLP option supplementary VNAs are sold for this application. Both, the forecast for the FSLP option as well as for the additional HW are illustrated in Figure 1.

illustration not visible in this excerpt

Figure 1: 5 year sales forecast for FSLP option and related additional new VNAs

The sales forecast as shown in Figure 1 can be described based on the following considerations:

- Introduction of a new measurement technique requires training of the sales force and customers hence a low start can be expected, one option within the first six month for an existing VNA.
- A continuous growth in year 2 and 3 after the launch is to be expected but due to the fact that the capabilities in terms of power handling are limited the numbers will still be low. Nevertheless, the industry and mainly research institutes will analyze the new method and further raise the demand.
- 4 years after the FSLP launch a declining number of sold options is projected due to the assumption that the previous gained feedback was translated into a new products, HW as well as SW, with more capabilities and presumably introduced to the market in that timeframe.
- The project end is expected 5 years after product launch that's why not more than 1 unit is estimated. The project end is aligned with the previous mentioned introduction of a successor with extended functionality.
- The FSLP option will mainly address research institutes and universities which are very often funded for new projects and that's why assumably two-thirds of the sold FSLP options will also lead to an additional VNA sell.

4. Operational cash flow and NPV calculation

Based on the assumptions and the forecasted sales figures the cash flow statement was developed and the NPV respectively IRR calculated. For the operational cash flow estimation of the project the following calculation has been done:

illustration not visible in this excerpt

Table 1: Calculation of operational cash flow

Based on the given figures the NPV (net present value) of the project is calculated based on a CAPM (capital asset pricing model) accounting a beta as well as a risk free and risk premium rate from a close competitor, Agilent Technologies, with a similar product portfolio. The interest rate r is calculated as follows:

[...]


[1] The measurement technique was presented firstly at the European Microwave conference in 2002 in Milan, Italy, by C. Dupont, N. Goia, D. Bourreau, and A. Peden from the university of Brest (Laboratoire d'Electronique et Systèmes de Télécommunications) in France

[2] The price of additionally sold HW is accounted with an average value because the final price depends on the configuration of the unit and might differ by ± 20 percent.

[3] The costs of additionally sold HW are accounted with an average value because the final price hence the costs are depending on the configuration of the unit and might differ by ± 20 percent.

Excerpt out of 17 pages

Details

Title
Financial Management. Active Incention project for VNA
College
University of applied sciences, Munich
Course
MBA
Grade
1.3
Author
Year
2011
Pages
17
Catalog Number
V233250
ISBN (eBook)
9783656494812
ISBN (Book)
9783656495253
File size
869 KB
Language
English
Tags
Financial Management, VNA, Cash Flow, NPV, Software, CAPM, COGS, IRR
Quote paper
Dipl. Ing. MBA Matthias Beer (Author), 2011, Financial Management. Active Incention project for VNA, Munich, GRIN Verlag, https://www.grin.com/document/233250

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