USEC executive summary example Essay Example

when evaluating a new project. Despite incurring additional expenses, the ACP project provides USEC with a competitive advantage over its rivals due to its future-oriented nature.

My recommendation to the company is that it should pursue this project since change is inevitable and sooner or later, the other companies will have to catch up. The sensitivity of this recommendation is that ACP, being a new project may fail to work and it will be a big blow to the USEC Inc. regarding the vast sums of money invested in the same.

On whether Rivanna should take a position on the American Centrifuge Project

I recommend that Rivanna Capital refrain from taking any stance on ACP because its market value as an investment has not been established yet. Time is the best predictor of the value of a new investment.

If Rivanna were to take a prolonged position on the project and it ended up being detrimental to value, this would indicate that the market value of the stock was inflated, resulting in an incorrect decision. Similarly, if Rivanna were to take a short position on ACP and it proved to be a value-generating investment, this would suggest that the market value of the stock was underestimated and they would miss out on potential profits. Therefore, it would be advisable for Rivanna to give ACP some time before determining whether to take a long or short position. In Exhibit 5, the USEC stock has experienced significant growth, and taking either a short-term or long-term position could have adverse effects on the stock's value, posing too much risk. Mackovjak will do everything possible to accurately assess ACP based on anticipated returns

and intuition rather than relying solely on facts and figures regarding ACP's performance.

Therefore, Mackovjak’s assessment can be considered an accurate estimate, which Rivanna should not rely on when making a decision regarding their position in the stock of USEC.

Short selling and its underlying reasons

Selling a borrowed security is commonly referred to as short selling. The main motivation behind this type of transaction is the belief that the security's price will inevitably decrease. In such cases, investors can benefit by buying back the borrowed stock at a lower price. Short covering, a significant aspect of short-selling, involves buying back the borrowed securities to close an open short position. Short selling is a risky strategy used to profit from a depreciating stock. It involves five steps: borrowing, selling, waiting, buying back, and returning.