Document Type

Closed Project

Publication Date

Spring 2017

Instructor

William Eisenhauer

Course Title

Advanced Engineering Economics

Course Number

ETM 535/635

Abstract

LiDAR (Light Detection and Ranging) is a remote sensing technology that uses light in the form of a laser pulses to create 3D images. LiDAR technology’s use on UAS (Unmanned Aerial System) is a relatively new concept in the rapidly advancing remote sensing & 3D imaging industry. As such, profitability data is either not released by similar business organizations, or there is simply not enough historical data to accurately predict revenue streams with either business model. To assess the feasibility of business models, market research and literature review were performed by our research team. Economic analysis methods were used to determine the most advantageous business plan strategy for the LiDAR business opportunities. Since the success of either business model will rely heavily on the company’s sales ability. Since the focus of this report is on economic analysis to make the best business decision, we have made our valuation calculations based conservative sales forecasts. The startup business plan identifies and critiques two business models identified by the founder entrepreneurs: 1. A service oriented model in which data is collected, processed, and delivered by an operations team to the customer. 2. A product oriented model in which LiDAR UAS is constructed, tested, and sold as a unit that includes training as an entire product for the customer’s own use. Based on these two models, three decision options were evaluated and compared with each other: 1. Invest in the Service only model 2. Invest in the Product only model 3. Do not invest, utilize the stock market for investment gains A 5-year cash flow analysis was conducted to give the founders a recommended strategy to optimize their investment. Through conducting a benefit cost analysis and calculating the internal rate of return of each opportunity, it was determined that both business models may be profitable and worthy investments. The expected IRR of service model and product model are 56% and 136% respectively. They are both much higher than the stock market option, which has an estimated MARR of 8% on average. Much of the risk in this analysis was the uncertainty in the sales revenue projections. The team endeavored to determine the sensitivity of the data by performing sensitivity analysis on these sales projections. Expected values were calculated taking into consideration of the most likely, optimistic and pessimistic cases. The sensitivity analysis result shows both business models are profitable under all conditions. The economic analysis has shown that while both business models are likely to be profitable, the Product Business Model has the potential for a higher return on investment. Therefore the research team recommends that the investors proceed with the Product Business Model outlined in the report.

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Comments

This project is only available to students, staff, and faculty of Portland State University

Persistent Identifier

http://archives.pdx.edu/ds/psu/21449

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