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
Q. Discount rate to the estimated NPV of the investment? There is no necessity to round the solution up to the nearest whole percentage. NPV approximate may be made using the e

XYZ Municipality purifies water before it enters the reticulation network. There are presently 3 purification processes available to the municipality. These processes sre referred

Cumulative and substitutional legacies and devises Where a will makes two gifts of unequal amounts to the same person, they are assumed, in the absence of a contrary indication

You have the following information about rates in London for Eurocurrency loans of one-year duration, the exchange rate between the USD and euros, the currency in which you want fi

Hi, I want to join expert mind as an accounting and financial expert and earn some money herein, can you please let me know the procedure and other requirements. Rahul Jhunjhunwal

Discuss the advantages and disadvantages of different types of financing: 1. Issuing bonds 2. Borrowing from Bank 3. Equity financing

Explain the mechanism that states use to prevent the double taxation of the income of a corporation doing business in two or more states.


The following information was taken from the ledger of Jefferson Industries, Inc.: Direct labor $85,000 Administrative expenses $59,0

Can you do the attached quections by Monday?