1. Which projects would you recommend Handstar pursue based on the NPV approach?

2. Assume the founders weigh a project’s NPV twice as much as both obtaining/retaining a leadership position and making use of the Internet. Use the weighted factor scoring method to rank these projects. Which projects would you recommend Handstar pursue?

3. In your opinion is hiring an additional software development engineer justified?

MINI CASE 

Handstar Inc. was created a little over four years ago by two college roommates to develop software applications for handheld computing devices. It has since grown to ten employees with annual sales approaching $1.5 million. Handstar’s original product was an expense report application that allowed users to record expenses on their handheld computer and then import these expenses into a spreadsheet that then created an expense report in one of five standard formats. Based on the success of its first product, Handstar subsequently developed three additional software products: a program for tracking and measuring the performance of investment portfolios, a calendar program, and a program that allowed users to download their email messages from their PC and read them on their handheld computer. The two founders of Handstar have recently become concerned about the competitiveness of the firm’s offerings, particularly since none of them has been updated since their initial launch. Therefore, they asked the directors of product development and marketing to work together and prepare a list of potential projects for updating Handstar’s current offerings as well as to develop ideas for additional offerings. The directors were also asked to estimate the development costs of the various projects, product revenues, and the likelihood that Handstar could retain or obtain a leadership position for the given product. Also, with the increasing popularity of the Internet, the founders asked the directors to evaluate the extent to which the products made use of the Internet.