Hi
Has anybody here had experience with Capital Budgeting?
The situation is the following: an industrial company lauches a new development approach which results in major savings in R&D, reduced time to market, and better flexibility. However, these benefits come later on, when new products are developed based on this initial base. The main difference is that products can be developed at the same time as updates of the base rather than sequentially as before. The base itself doesn’t give any revenue although requires huge investments.
Therefore, there is a question: how would we calculate profitability of this approach? Before, standard methods such as NPV, IRR, and payback period were used, but for simple sequential projects. Are there any alternative capital budgeting methods/ cost analyses?
Thanks a lot