Financial management and risk analysis Essay Example | Topics and Well Written Essays - 2000 words

Financial commission and risk analysis - Essay ExampleThe new assembly cell removes three cell computer programmer/operators recruited at a salary of 20,000 per year each. The cell robots are expected to last for 5 years, by and by which they can be sold off for an estimated price of 1,000 each. The companys cost of capital is currently 10%.This is a two- plectrum financial investing appraisal case which compares the cost of operating an existing sub-assembly personal line of credit with the cost of a new automated assembly cell. Both options incur costs we could compare to meet out which option precedes in lower expenses over the next five years. Any savings volition increase profits, which we can then transform into additional value that would benefit our shareholders.We utilised common investment criteria to analyse this project, and considered other factors that may affect its financial viability. We included our suggested solutions and potential effects on the last(a) decision through a sensitivity analysis, which takes into account1. The cost of replacing our eight fitters and with three proficient operators. We included the effect of granting separation pay to each displaced operator and made a recommendation on how much we could afford to pay.The key insight to our problem is to match the cash flows for both options. weft 1 is our existing sub-assembly line, whilst Option 2 would be our proposed investment in new automated machines. Each option has a cash outflow over the next five years. Whilst Option 1 would not require a large cash outflow now, it has the same level of cash flows we are currently disbursement to maintain the line. In contrast, Option 2 demands a large cash outflow now, but this would result in lower cash flows over the next five years.We compared both cash flow forecasts and arrived at a net cash flow, which is the amount of working capital we would save from the lower cash requirements of Option 2. A basic assumption is that the sub-assembly lines productivity would be constant, and that