Some of the most important types of risks associated with this project are the legal risks, physical risk, the risk of time value of money etc. In order to work on a robotic project, the company may have to occupy the license from relevant authorities to work on such projects. In absence of legal permission, the company may get stuck with regulatory ban on the project. It may also face the monetary fines. The risk that the accidental incidents may occur at the workplace in current project is assumed as the physical risk.
This risk can be managed by ensuring appropriate safeguard tools and techniques at the workplace. The risk of time value of money is managed by identifying the present value of future cash in-flows of the project. Therefore, by using the present value of future cash flows, the time value risk can be managed in the project while evaluating the feasibility of project.
To analyse Robot Project, five investment appraisal techniques such as internal rate of Return (IRR), Net Present Value (NPV), Payback Period (PB), Profitability Index (PI) and Simple Cash are used in versus cash out. These are the important techniques to appraise an investment proposal of a firm. A project with higher IRR than the rate which is used to discount the cash flow is likely to add value for the investors and company (Melicher and Norton, 2010). On the other hand, lower IRR than the discounted cash flow rate is expected to destroy both the value of the company and investors. Similarly, a project with low PB is accepted for investment. In case of lower NPV than the initial investment, the project is selected for investment purpose. A project with higher PI is adopted for the reason that it exhibits the capability of developing profitability.
Weighted Average Cost of Capital (WACC) is calculated to determine the minimum rate of return, which is required to create value for a company. The capital structure of this firm includes different sources of fund (Mayo, 2010). It is calculated on the basis of given information that WACC is 7.05% (See Appendix 1). It can be interpreted from this that the Robot Project should provide the rate of return equal which is more than7.05%.