Case Study Analysis Husk Power Systems: Financing Expansion

Case Study Analysis
Husk Power Systems: Financing Expansion

Case -- The Investment Detective
The essence of capital budgeting and resource allocation is a search for good investments in which to place the firm’s capital. The process can be simple when viewed in purely mechanical terms, but a number of subtle issues can obscure the best investment choices. The capital budgeting analyst is necessarily, therefore, a detective who must winnow good evidence from bad. Much of the challenges is knowing what quantitative analysis to generate in the first place.
Question 1: Can you rank the projects simply by inspecting the cash flows?
Answer: The projects can be ranked on the basis of inspecting the cash flows, though it may not be a very good measure.
CALCULATION OF CASH FLOW OF DIFFERENT PROJECTS |
Project No | 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 |
Initial Investment | -2000 | -2000 | -2000 | -2000 | -2000 | -2000 | -2000 | -2000 |
1 | 330 | 1666 |   | 160 | 280 | 2200 | 1200 | -350 |
2 | 330 | 334 |   | 200 | 280 |   | 900 | -60 |
3 | 330 | 165 |   | 350 | 280 |   | 300 | 60 |
4 | 330 |   |   | 395 | 280 |   | 90 | 350 |
5 | 330 |   |   | 432 | 280 |   | 70 | 700 |
6 | 330 |   |   | 440 | 280 |   |   | 1200 |
7 | 330 |   |   | 442 | 280 |   |   | 2250 |
8 | 1000 |   |   | 444 | 280 |   |   |   |
9 |   |   |   | 446 | 280 |   |   |   |
10 |   |   |   | 448 | 280 |   |   |   |
11 |   |   |   | 450 | 280 |   |   |   |
12 |   |   |   | 451 | 280 |   |   |   |
13 |   |   |   | 451 | 280 |   |   |   |
14 |   |   |   | 452 | 280 |   |   |   |
15 |   |   | 10000 | -2000 | 280 |   |   |   |
  |   |   |   |   |   |   |   |   |
Sum of Cash flow benefit | 3310 | 2165 | 10000 | 3561 | 4200 | 2200 | 2560 | 4150 |
Excess of cash flow over initial investment | 1310 | 165 | 8000 | 1561 | 2200 | 200 | 560 | 2150 |

COMPANY BACKGROUND
Founded in 2007, Husk Power Systems (HPS) is a decentralized power generation and distribution company serving...