HIFU TAOC: Investing in Tech Projects: Introduction to Project Valuation

Antón, Miguel; Giné, Mireia; Eufinger, Christian; Sacchetto, Stefano

Product #:F-0996-E

Supplier:IESE Publishing

Discipline:Finance

Setting:Israel, 2023

Details:Case (PDF) • 2 pages • 2023-05-29

Subjects:

Geography:

Israel

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The case delves into the strategic decision-making process at Tel Aviv Oncology Center (TAOC) under the leadership of its new Managing Director, Dr. Lia Abrams. With a vision to establish TAOC as a regional reference center, Dr. Abrams evaluates the adoption of High-Intensity Focused Ultrasound (HIFU) technology, a non-invasive treatment for tumors in hard-to-operate areas. The case discusses the potential financial benefits of this investment, including incremental revenues, operational cost savings, and the required additional personnel expenses. It also examines the considerations of financing the HIFU machine, weighing the pros and cons of equity financing versus bank loans, and assessing the overall economic impact of this strategic move on TAOC's future growth and competitiveness.

Learning Objectives

The main purpose of the case study is to introduce the topic of capital budgeting using discounted cash flow analysis. By examining the decision to adopt the new HIFU technology, students gain practical insights into: 1) Project evaluation: The case demonstrates the process of evaluating a strategic investment by considering its potential impact in terms of growth and competitiveness. 2) Cash flow projections: Students learn to estimate the future cash flows of a project, taking into account incremental revenues, operational cost savings, additional personnel expenses, and other related costs. 3) Net Present Value (NPV) computation: The case offers an opportunity to practice calculating the NPV of a technology investment, by discounting the projected cash flows and comparing them to the initial outlay. 4) Internal Rate of Return (IRR) computation: Students can apply the IRR method to evaluate the attractiveness of the investment.