Kelly Solar - Case Solution

Introduction – Kelly Solar

After hard work for two years, along with huge costs in purchasing patents and doing research & development, sometime in early May, Jessica Kelly was still unclear about any potential returns from selling her product Kelly Solar. This is due to the fact that she does not want to remain in this business and wants to sell the technology along with patents to the industry’s sole manufacturer.

Moreover, uncertainty has increased due to the emergence of new similar technologies, which means there is an equal probability that her newly developed product will pay off a handsome return of $22 million or become worthless because manufacturers will back only one technology.

In such a scenario, only adding improvements to her already developed technology can increase the chances of its acceptance by 70% and receive a payoff of $22 million. Otherwise, if not accepted, it will bring her nothing, and most probably, Kelly Solar will default.

An additional investment of $3.2 million is required, and she had just two sources to finance this additional improvement in her technology.

Problem Statement

Under such conditions, does the additional investment in Kelly Solar make sense? Should Jessica invest all the required money herself for the additional improvements? Does it make sense for Barkly to provide all additional investment required by Kelly Solar under the terms of the current contract?

Under such circumstances, does the additional investment in Kelly Solar

make sense?

Since all the previous efforts and invested money are at stake due to the emergence of new technology, adding some more value to the product by making additional investments is inevitable in such circumstances.

If improvements were not made, there are equal chances of failure and success, where the costs associated with the failure are huge, i.e., a loss of $22 million along with huge debt, a burden to be paid for by Kelly Solar. And if accepted, the product and payoff will gather…