Our Investment Portfolio
Sun Dish, Inc. has reserved a staggering amount of $2 million to invest in its new business venture – that of the satellite dish. For the reason that all of these funds would not be utilized immediately, it is wise to invest a large part of them in order to increase our income from investments.
Traditionally, our company has invested in a combination of the following: (1) money market funds, with an expected annual rate of return of 12.25%; (2) stocks, with an expected annual rate of return of 11. 5%; (3) school bonds, yielding around 4% in returns annually; (4) certificates of deposit, with an expected annual rate of return of 3%; (5) tax-free municipal bonds, yielding approximately 6. 5% in returns annually; and (6) treasury bills, with an expected annual rate of return of 7. 5%. Money market funds, stocks, and treasury bills are all liquid; while the rest of our traditionally used investment options are non-liquid. Moreover, both money market funds and stocks are risky investments.
The remaining investment options are less risky. Sun Dish, Inc. follows certain corporate principles in its investment decisions. We will not invest more than 30% of our funds in money market funds and stocks because both of these investments are quite risky. And, we will not invest more than 50% in these two investment types altogether. Also, it has been determined that since the company would need any amount of money required at any time for the satellite dish business, we would not invest more than 30% of the total amount in non-liquid investment options.
Seeing that the treasury bills issued by the Federal Reserve are both liquid and less risky, Sun Dish, Inc. should decide to invest at least 15% of its total funds in this investment type. We also must bear in mind that at least 10% of the total funds must be invested in each of the six investment types. This is for the reason of diversification. Lastly, Sun Dish, Inc.
has estimated that it can invest a maximum of 30% of its total money in money market funds; 30% also in stocks; 20% in school bonds; 25% in certificates of deposit; 40% in tax-free municipal bonds; and a maximum of 25% of total money in treasury bills. Using all of the detailed conditions regarding our investment portfolio, we hope to arrive at a useful combination of investment options. New Product Mix Sun Dish, Inc. is now planning to produce three different products: the HD receiver, the Digital receiver, and the satellite dish.
The company would like to produce at least 50,000 units of each product. Our marketing department reaches at least 50,000 customers for HD receivers and Digital receivers already. However, the number of customers reached for the satellite dish would depend on the combination of media outlets we eventually select for our new advertisement campaign, depending on the costs and viability of each media option. The company has already figured out that the number of HD receivers produced should be no more than fifty percent of the number of Digital receivers produced.
This is because there are fewer customers that require HD receivers as compared to Digital receivers. Each HD receiver we produce costs us 0. 4 hours in terms of fabrication, assembly, inspection and testing, and packing. Every Digital receiver costs us 0. 44 hours in terms of the same tasks.
And, each satellite dish we produce is expected to cost us 0.58 hours in fabrication time, assembly time, inspection and testing time, and packing time. One unit of each of the three products in our product mix costs us a total of 0. 45 hours in fabrication time, with the workforce cost per hour being $7. There are a total of 30,000 hours in fabrication time available to the company. Producing one unit of each of the three products additionally costs us 0. 45 hours in assembly time, with the workforce cost per hour being $9. For assembly, as for fabrication, we have 30,000 available hours to work on our product mix.
Similarly, producing a unit of each of the three products costs us 0. 37 hours in inspection and testing time; and 0. 15 hours in packing time. The workforce cost per hour for inspecting and testing is $8. 5, with a grand total of 30,000 hours available for all the products; and the workforce cost per hour for packing is $7. 25. We have 10,000 hours available to do our entire packing job. Given that the product mix we eventually choose is dependent on the costs we face, Sun Dish, Inc. would be using this data to arrive at a most suitable product mix.
In other words, our decision based on our given costs would tell us how many satellite dishes we would end up producing in the first six months after the launch of the new product. After the first six months, however, our product mix is expected to change based on the evidence we gather in the beginning phase of the production and sales of the satellite dish.