QUESTION 1 THE FUTURE IS NOW The CEO of Nomadic Tech, Jan Toole has announced that they have come up with a new invention They plan to sell a hovering personal assistant robot ball to respond to voice commands to replace the desktop versions Jan realizes there is many competitors in this space but the hovering technology has been patented by Nomadic Tech and might be a game changer in the future It is estimated that the cash returns generated by this new product line, the robot personal assistant will be $800,000 per year for the next 5 years, and then $500,000 per year for three years after that The cash returns will occur at the end of each year The returns are substantial but the CEO is worried that the company holds a significant debt load that could lead them to default on their loan to the banks and also not being able to dividends to their preferred shareholders in the short term You also notice that during one of the meetings Jans production officer made an error regarding nominal rate of interest and the effective rate SOLVE AND ANALYZE 1A What is the present value of these cash returns, at a 9 interest rate (15 marks) 1B You have a meeting with Jan and as their finance consultant, and you need to give them some advice and recommendations based on the numbers you have calculated and also what you see in the financials and in the company Please advice the CEO and their management team and what they can do next in the short, medium and long term to improve their finance and financial system (10 marks)

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Posted on Jul 23, 2024

QUESTION 1 THE FUTURE IS NOW The CEO of Nomadic Tech, Jan Toole has announced that they have come up with a new invention. They

QUESTION 1

THE FUTURE IS NOW

The CEO of Nomadic Tech, Jan Toole has announced that they have come up with a new invention. They plan to sell a hovering personal assistant robot ball to respond to voice commands to replace the desktop versions. Jan realizes there is many competitors in this space but the hovering technology has been patented by Nomadic Tech and might be a game changer in the future.

It is estimated that the cash returns generated by this new product line, the "robot personal assistant" will be $800,000 per year for the next 5 years, and then $500,000 per year for three years after that. The cash returns will occur at the end of each year.

The returns are substantial but the CEO is worried that the company holds a significant debt load that could lead them to default on their loan to the banks and also not being able to dividends to their preferred shareholders in the short term. You also notice that during one of the meetings Jans production officer made an error regarding nominal rate of interest and the effective rate.

SOLVE AND ANALYZE

1A. What is the present value of these cash returns, at a 9% interest rate? (15 marks)

1B. You have a meeting with Jan and as their finance consultant, and you need to give them some advice and recommendations based on the numbers you have calculated and also what you see in the financials and in the company. Please advice the CEO and their management team and what they can do next in the short, medium and long term to improve their finance and financial system. (10 marks)