Study On Investment Decision Of GZLR Auto Seating Program

GZLR automotive seating program is jointly initiated by GBJ and one of Global Top 500 enterprises.The preliminary assessment indicates that while the program is worth investment from the perspective of market,technology,equipment,engineering,energy efficiency and organization structure,no reliable result can be achieved in respect of the investment decision from economic-efficient point of view.The present dissertation attempts to study the investment decision systematically by employing the calculation involving all sorts of financial indicators so that decision can be made on whether such investment should be made or not.First of all,estimation is made on each investment item,cost,expenses,sales volume and unit price that exist in the program period,so as to figure out net cash flow during each cyclical period.Next,the discount rates adopted in auto seating industry and for the this program is determined by means of referencing historical documentation,polls and surveys.Then,once the net cash flow and the discount rate are nailed down,the pay-back period,net present value,internal return rate and modified internal return rate are calculated with the aid of EXCEL.Last,quantitative analysis is conducted on all risk factors and the single-factor sensitive analysis tells the sensitive risky factors,of which sales price and material cost are quite sensitive to the variation.In addition,multi-factor sensitivity analysis is adopted to analyze and assess the comprehensive risk resistance capacity and the conclusion is that the risks are controllable.Meanwhile,countermeasures are put forward in regards to the risk control.The study suggests that the NPV is RMB 83.55 million,and MIRR is 23.94%,and as per program investment decision rules,NPV 83.55 million is above 0,and MIRR 23.94% is above Required Return 10.5% suggested in Chapter 4.1,therefore the program is worth investment,which is to enhance the value of GBJ.