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|Managing Financial Resources and Decisions | |
|Assignment Title & Number: |Learning Outcomes Covered: |Assessment Criteria Covered: |
| | |1.1,1.2,1.3,2.1, |
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Regular loss of signal and regular disconnection of calls have been the most frequent complaints made by the customers. As a result of these complaints a number of customers have shifted towards other competitors in the market.
The Board of Directors of the business had voiced concern over this issue and had appointed a team to find the main cause of regular failures. The team had identified that the main cause of regular failures was the use of obsolete equipment for the transmission of signals. The equipment used by the company was initially bought in when the company was initially created and had not been replaced to date. As a result the Board of Directors of the company had decided to replace the equipment used for transmission of signals.
The replacement of equipment would cost the organization Rs.50 million, which is required to be invested immediately. As a result of the project Telco is expected to generate a net cash inflow (without depreciation) of Rs.15 million in the first year of operation. The cash flow is expected to increase by 20% in the second year. How ever the cash inflow is expected to increase only by 10% in year 3, from the cash flow received in year 2. There is no cash flow increase expected in the remaining years and it is expected that the year 3 cash inflow would remain constant until the end of the 8 year.
The equipment purchased are expected to be operational for an 8 year