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H2O Innovations: Identify problems for a capital project

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H2O Innovations: Identify a new capital project. Describe the project and problems you are going to have in estimating the cash flow that might be emanating from the initial investment and problems in getting it funded. Issues might be:
• Risk
• Cost
• Politics (getting it through committees)
• Public Relations
• etc.,
Describe the problems you see in getting the funding to see it through.

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Solution Summary

Your draft is 738 words, four references and an exhibit from the firm's 2012 annual report.

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H2O Innovations Inc.

H20 Innovations Inc. (HI) design and manufactures custom high-performance water treatment solutions. In other words, in a world of shrinking clean water supplies, HI can recycle used water! Their expertise and market advantage is that they have a process and technology that is superior to the existing models. Their systems can process more water, with better results, in less time, using less space, with less on-going operating costs, and less risk of contamination. As you can see from their balance sheet (Exhibit 1), their primary assets are intangible.

In order to continue to be a market lead in the water cleaning business, they have to continue to innovate and then protect those innovations with patents that are defensible. The innovation business is about research and development costs. New research projects are a little like drilling for oil. You have many "dry holes" but if one of the group pays off, it usually pays off HANDSOMELY. So, for HI, the most likely "possible investment" would be a research and development project to develop a new fiber, a new fitting, a new configuration, a new value, or a new membrane. Here are the problems such ...

Solution provided by:
Carol Sargent, PhD
Education
  • BSc, University of Virginia
  • MSc, University of Virginia
  • PhD, Georgia State University
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