Saudi Aramco is considering investing in a new long-term project related to energy infrastructure. The project will require a large investment today and is expected to generate cash flows over several future years.
Management is debating whether to proceed with the project. Some executives argue that the project should be accepted because it will generate cash inflows in the future, while others are concerned about the timing of those cash flows, uncertainty, and alternative investment opportunities.
Required:
a) From a finance perspective, explain why receiving cash flows in the future is not the same as receiving cash flows today, even if the total amount is expected to be higher.
b) Explain the role of risk in evaluating long-term investment projects and how it may affect the companys decision.
c) Suppose Saudi Aramco has another investment opportunity with lower risk but smaller future returns.
From a finance perspective, explain how the company should think about choosing between the two projects.
Requirements: Well
Get fast, custom help from our academic experts, any time of day.
Place your order now for a similar assignment and have exceptional work written by our team of experts.
Secure 100% Original On Time Delivery