A value-based financial decision framework for an entrepreneurial aviation entity
Gerber, Madelein Joan
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The Aviation Industry in South Africa is considered to be a budding industry with an expected growth rate of 14% for each of the next three years. Considering that, plenty investment and expansion possibilities are probably available in this industry. Nonetheless, given the current economic situation, challenges may exist that necessitates the development of a decision framework. The aim of this framework should thus be to assist with informed decision-making; whether to invest in, or utilize opportunities that may occur within a given prospective “high” growth situation. In the light of all of this, a specific aviation entity desires to exploit possible business opportunities that may occur. Provided the relative high growth situation in the Aviation Industry, as mentioned above, the entity has a specific need for a decision tool which could determine whether to invest in new projects or not. In order to meet this need, a decision framework has been developed during this study. Considering the emphasis currently placed on wealth creation in the business environment, it is considered appropriate to utilize the value-based management approach in this study, with specific reference to capital budgeting techniques in developing a decision framework. Data for the study has been obtained from the participating aviation entity, who was considering investment in a specific project, given the previously referred to prospective high growth situation in the Aviation Industry. The decision framework or model was developed using Microsoft Excel as the development platform. Based on the input data, as received from the aviation entity, the results from the decision model indicated that the considered project was indeed financially viable.