Ms Claire Samba Is Assessing a Proposed 4-Year Investment Requiring

question 1

Essay

Ms Claire Samba is assessing a proposed 4-year investment requiring an initial outlay of $200,000. From her analysis she has predicted future end-of-year operating cash flows arising from the investment as follows: year 1 - $12,000 (cash inflow); year 2 - $30,000 (cash inflow); year 3 - $60,000 (cash inflow) and year 4 - $25,000 (cash outflow).
At the end of year 4 Claire also expects to realise $280,000 from the sale of the investment. As Claire's trusted adviser you have assessed the risk of the investment being 9% p.a. compounded monthly.
Would you recommend Claire proceed with the investment based on the information provided?

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Definitions:

Plaintiff

The party who initiates a lawsuit by filing a complaint with the court alleging wrongdoing by another party, known as the defendant.

Damages

Monetary compensation awarded to a party in a legal proceeding for loss or injury.

Prove

To demonstrate the truth or existence of something through evidence or argument.

Undue Influence

Improper or unlawful pressure exerted on a person, compelling them to act against their will or to give up a legal right.