Question
Having decided what to do with the stress equipment together with Mrs Fox, Nigel decided to go and get himself a cup of tee. Whilst
Having decided what to do with the stress equipment together with Mrs Fox, Nigel decided to go and get himself a cup of tee. Whilst pouring the water into his cup he heard a set of familiar voices. It was the CEO, Ron Clarkson, and chairman of the board, Julie Hammer. July is know to be very straight forward and today was not an exception. "We need to get out of our dependence on oil" she said. The idea was that that the oil business is coming to an end and that will be sooner than anyone can imagine. However there are opportunities at the horizon and that is a combination of hydrogen and wind power and this requires a very special type of pumps that Mrs Fox and her team have developed and got certified but the European safety authorities leaving H&S Plc being the only supplier on the continent. Julie stressed that the risk with entering a new business required additional five percent on top of the normal required rate of 10% Then the required ROI, return on investment, at 15% must be met. Ron asked Nigel to be the company's representative in a group with several investors to explore this opportunity. Nigel needed to hand over his normal job to his deputy Anna Lindros and travel to London to meet the group who secretly was going to meet at Corinthian Hotel. The group consisted of the most knowledgeable technicians, program managers and business people in the UK. The stakes was massive and so also the complexity of the project that was going to be situated north of Edinburgh. The details were carved out and for H&S Plc. the investment was 30 million. A number of scenarios was agreed to and for the first year. There was a likelihood of 55% to get a cash flow, CF, of 10 million and 45% at 20 million during the first year. Given the 20 million the group identified a 25% chance for 35 million, 50% for 45 million and 25% at 15 million. If then the 10 million was delivered during the first year then the estimate was that at 30% 35 million was going to be received, 50% at 25 million and 20% at 10 million. Received cash flows were expected to be received at the end of each year. Back at office Nigel had to spend some time to deliver the analyse to Ron and Julie. Please make this analyse and give your recommendation for how to go forward.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started