Estimate net cash flow, Corporate Finance

Allied Managed Care Company is evaluating two different computer systems for handling provider claims.

There are no incremental revenues attached to the projects, so the decision will be made on the basis of the present value of costs. Allied's corporate cost of capital is 10 percent. Here are the net cash flow estimates in thousands of dollars:      

Year      System X          System Y
0            -$500            -$1,000
1            -$500               -$300
2            -$500               -$300
3            -$500               -$300

a. Assume initially that the systems both have average risk. Which one should be chosen?

b. Assume that System X is judged to have high risk. Allied accounts for differential risk by adjusting its corporate cost of capital up or down by 2 percentage points. Which system should be chosen?

 

Posted Date: 2/28/2013 12:55:35 AM | Location : United States







Related Discussions:- Estimate net cash flow, Assignment Help, Ask Question on Estimate net cash flow, Get Answer, Expert's Help, Estimate net cash flow Discussions

Write discussion on Estimate net cash flow
Your posts are moderated
Related Questions

Ask question #Minimum 100 words accepted FIN 610 Milestone One Guidelines and Rubric Overview: For this first milestone, which is due in Module Three, you will describe each of the

Question: (a) i. Expected loss= Exposure amount* probability of default* loss given default ii. Positive covenants= covenants that showing the direction to a company. P

Question: (a) Describe why the discount rate equals opportunity cost of capital? (b) "Nominal rate less inflation rate is equal to real rate of return" - Is it true? Why or

i have a project due on the cost of capital for a specific company 3500 word limit, can you help me

QUESTION Assume Venture Healthcare sold bonds that a 10 year maturity, a 12% coupon rate with annual payments, and a $1,000 par value. a. Suppose that two years after the bo

Some aggregate figures concerning the available data are shown in Table 1. The sizes of both the assortment groups and the product groups vary greatly across the groups. In Season

I have been given 3 different types of projects. They state the IRR and how much the project will add. The question goes on to give a WACC with break points. The question wants

Think of any business you would like to open in Lebanon (from small to big project) and prepare a preliminary income statement from five to eight years maximim. Compute the expecte

Question: "The separation of ownership and control of a corporate firm has given rise to what is called ‘a positive and normative divide' in explaining managerial behaviour. F