High Mountain Technologies Case Summary

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High Mountain Technologies (HMT) is an expanded research and manufacturing company that produces a wide range of innovative products based on patented technologies. Its corporate headquarters and research and design facility were located in Toronto. According to the situation illustrated in the case, there were two investment opportunities available to High Mountain technologies. With respect to its investment budget at $3 million, related to manufacture of GPS transmitters used by the parents to keep track of their children or Surveillance Aircraft, used by the military to provide valuable battlefield intelligence. So, at first, one of problems in this case is based on fact that HMT hired the certified management accountant who did not have any experience in areas of capital budgeting or cost of capital; hence company would maybe have problems because he has very serious task. Another problem is to make a final decision in which of two projects to invest money: In GPS transmitter that fit into the shoes of children or small surveillance aircraft with ability to remain in the air for 48 hours). Besides that, Rogers has been given the assignment of completing a capital budgeting analysis of these projects.…show more content…
Therefore, with respect to the first opportunity relating to GPS transmitters, the cost of capital was estimated at 12.64%. Whereas, the weighted average cost of capital for the industry was estimated at 9.614% in which, 3% extra was added, as an extra provision for risk. On the other hand, for the second investment project relating to surveillance Aircraft. In which, the cost of capital was estimated at 8.548%, calculated by considering the industrial average of Beta, and then estimating its cost of
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