Ask Question, Ask an Expert

+1-415-315-9853

info@mywordsolution.com

Ask Basic Finance Expert

At the end of 2012 Omega Corporation was considering undertaking a major long-term project in an effort to remain competitive in its industry. The production and sales departments determined the potential annual cash flows savings that could accrue to the firm if it acts soon. Specifically, they estimate that a mixed stream of future cash flow saving will occur at the end of the years 2013 to 2018. The years 2019 to 2023 will see consecutive and equal cash flow savings at the end of each year. The firm estimates that its discount rate over the first six years will be 7%. The expected discount rate over the years 2019 to 2023 will be 11%. The project manager will find the project acceptable if it results in present cash flow saving of at least $860000. The following cash flow savings data are supplied to the finance department for analysis

End of year Cash flow savings ($)

2013 110000

2014 120000

2015 130000

2016 150000

2017 160000

2018 150000

2019 90000

2020 90000

2021 90000

2022 90000

2023 90000

1. Determine the value (at the beginning of 2013) of the cash flow savings expected to be generated by this project.

2. Based solely on one criterion set by the management, should the firm undertake the specific project? describe.

3. What is the 'interest rate risk' and how might it influence the recommendation made in problem 2?

Basic Finance, Finance

  • Category:- Basic Finance
  • Reference No.:- M940033

Have any Question? 


Related Questions in Basic Finance

Problema manager checked production records and found that

Problem A manager checked production records and found that a worker produced 195 units while working 50 hours. In the previous week, the same worker produced 144 units while working 40 hours. a. Compute Current period p ...

With financial intermediation net lenders can earn a

"With financial intermediation, net lenders can earn a higher return on their surplus funds, and net borrowers can acquire funds at a lower cost." Explain how this seemingly contradictory statement can be true. (Hint: Co ...

You want to have 80000 for your daughters education 18

You want to have $80000 for your daughter's education 18 years from now. If you can earn 3 percent, compounded quarterly, on your savings, how much do you need to deposit today to reach your goal?

Select a publicly-traded united states corporation and

Select a publicly-traded United States corporation and analyze its funds acquisition techniques. Your paper must be between 8 and 10 double-spaced pages and include the following discussions: 1. Brief history or backgrou ...

In 2006 ben bernanke said the goals of strong output growth

In 2006, Ben Bernanke said the goals of strong output growth and low inflation "are almost always consistent with each other." Alan Greenspan once called the trade-off between output and inflation "ephemeral." a. Are the ...

If the rate of return on the sampp 500 index was 23 for

If the rate of return on the S&P 500 index was 23% for 2009, and the risk-free rate at the end of 2009 was 1%, calculate the equity risk premium for 2009. Recalculate the equity risk premium using 1981 data, when the ris ...

Why is knowledge of finance important in running of

Why is knowledge of finance important in running of organizations?

What is a real money balanceif the nominal money supply

What is a real money balance? If the nominal money supply increases 20 percent while prices increase 20 percent, what happens to the demand for real money balances? What happens to the supply of real money balances?

Financediscussion 1multinational financial management

Finance Discussion 1 "Multinational Financial Management" Please respond to the following: • From the e-Activity, determine key reasons why a multinational corporation might decide to borrow in a country such as Brazil, ...

Finance problemproblem 1 the owner of genuine subs inc

Finance problem Problem 1: The owner of Genuine Subs, Inc., hopes to expand the present operation by adding one new outlet. She has studied three locations. Each would have the same labor and materials costs (food, servi ...

  • 4,153,160 Questions Asked
  • 13,132 Experts
  • 2,558,936 Questions Answered

Ask Experts for help!!

Looking for Assignment Help?

Start excelling in your Courses, Get help with Assignment

Write us your full requirement for evaluation and you will receive response within 20 minutes turnaround time.

Ask Now Help with Problems, Get a Best Answer

A cola-dispensing machine is set to dispense 9 ounces of

A cola-dispensing machine is set to dispense 9 ounces of cola per cup, with a standard deviation of 1.0 ounce. The manuf

What is marketingbullwhat is marketing think back to your

What is Marketing? • "What is marketing"? Think back to your impressions before you started this class versus how you

Question -your client david smith runs a small it

QUESTION - Your client, David Smith runs a small IT consulting business specialising in computer software and techno

Inspection of a random sample of 22 aircraft showed that 15

Inspection of a random sample of 22 aircraft showed that 15 needed repairs to fix a wiring problem that might compromise

Effective hrmquestionhow can an effective hrm system help

Effective HRM Question How can an effective HRM system help facilitate the achievement of an organization's strate