System x is judged to have high risk, Financial Accounting

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: 3/14/2013 3:57:14 AM | Location : United States







Related Discussions:- System x is judged to have high risk, Assignment Help, Ask Question on System x is judged to have high risk, Get Answer, Expert's Help, System x is judged to have high risk Discussions

Write discussion on System x is judged to have high risk
Your posts are moderated
Related Questions
definition of cost of control

Accounting policies Accounting policies are the specific assumptions, bases, principles and practices that are adopted by firms in preparing financial statements. The standard

Final accounts 1) Examination questions – two types of problems arise in examinations: transfers between head office and branch are made at cost; or Transfers bet

I am needing homework help on my Principles to Accounting 1, but don''t know how much you guys charge

An investor holds a bullish view for the equity market over the next twelve months and wishes to recalibrate his portfolio to reflect this view. The investor's portfolio consists o

Dissolution If the winding up continues for more than a year, the liquidator must file progress reports with the registrar at such intervals as the court may prescribe s.333. W

Materials used by Company X in producing Division A's product are currently purchased from outside suppliers at a cost of $30 per unit. But the same materials are available from Di

Revenue expenditures 1. Are additional costs of plant assets that do not materially increase the asset's life or its productive capabilities 2. Are known as balance sheet expenditu

A____ is a loss to the business and a gain to the debtor

Leverage or Gearing Ratios - These ratios include the Long Term Debt to Equity Ratio, Total Debt to Equity Ratio, Interest Coverage Ratio. Here, the interest coverage ratio is al