Value of a mixed stream Harte Systems, Inc., a maker of electronic survillance equipment, is considering selling the rights to market its home security system to a well-known hardware chain. The proposed deal calls for the hardware chain to pay Harte $34,000 and $29,000 at the end of years 1 and 2 and to make annual year-end payments of $14,000 in years 3 through 9. A final payment to Harte of $10,000 would be due at the end of year 10. . Select the time line that represents the cash flows involved in the offer. . If Harte applies a required rate of return of 9% to them, what is the present value of this series of payments? c. A second company has offered Harte an immediate one-time payment of $120,000 for the rights to market the home security system. Which offer should Harte accept? . Which of the following time lines represents the cash flows involved in the offer? (Select the best answer below.) OA. 0 1 2 3 OB. OC. OD. 0 0 0 $10,000 $14,000 1 2 $34,000 1 $29,000-$14,000 2 $29,000 3 $34,000 $29,000 1 2 3 $14,000 3 -$34,000-$29,000-$14,000 9 10 $29,000 $34,000 9 10 -$14,000 $10,000 9 10 $14,000 $10,000 9 10 -$14,000-$10,000

Value of a mixed stream Harte Systems, Inc., a maker of electronic survillance equipment, is considering selling the rights to market its home security system to a well-known hardware chain. The proposed deal calls for the hardware chain to pay Harte $34,000 and $29,000 at the end of years 1 and 2 and to make annual year-end payments of $14,000 in years 3 through 9. A final payment to Harte of $10,000 would be due at the end of year 10. . Select the time line that represents the cash flows involved in the offer. . If Harte applies a required rate of return of 9% to them, what is the present value of this series of payments? c. A second company has offered Harte an immediate one-time payment of $120,000 for the rights to market the home security system. Which offer should Harte accept? . Which of the following time lines represents the cash flows involved in the offer? (Select the best answer below.) OA. 0 1 2 3 OB. OC. OD. 0 0 0 $10,000 $14,000 1 2 $34,000 1 $29,000-$14,000 2 $29,000 3 $34,000 $29,000 1 2 3 $14,000 3 -$34,000-$29,000-$14,000 9 10 $29,000 $34,000 9 10 -$14,000 $10,000 9 10 $14,000 $10,000 9 10 -$14,000-$10,000

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter19: Lease And Intermediate-term Financing

Section: Chapter Questions

Problem 2P

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Value of a mixed stream Harte Systems, Inc., a maker of electronic survillance equipment, is considering selling the rights to market its home security system to a well-known hardware chain. The proposed deal calls for the hardware chain to pay Harte $28,000 and $29,000at the end of years 1 and 2 and to make annual year-end payments of $10,000 in years 3 through 9. A final payment to Harte of $10,000 would be due at the end of year 10. b. If Harte applies a required rate of return of 12% to them, what is the present value of this series of payments? c. A second company has offered Harte an immediate one-time payment of $90,000 for the rights to market the home security system. Which offer should Harte accept?
Unequal lives-ANPV approach JBL Co. has designed a new conveyor system. Management must choose among three alternative courses of action: (1) The firm can sell the design outright to another corporation with payment over 2 years. (2) It can license the design to another manufacturer for a period of 5 years, its likely product life. (3) It can manufacture and market the system itself; this alternative will result in 6 years of cash inflows. The company has a cost of capital of 12.4%. Cash flows associated with each alternative are as shown in the following table. (Click on the icon here in order to copy the contents of the data table below into a spreadsheet.) Alternative Initial investment (CFO) Year (t) 1 2 3 4 5 6 Sell $200,200 $199,600 251,000 Manufacture $449,000 a. The net present value for the option to sell is $ License $200,100 Cash inflows (CFt) $250,200 99,800 80,700 59,600 39,400 $199,200 245,000 199,200 199,200 199,200 199,200 a. Calculate the net present value of each…
NPV Simes Innovations, Inc., is negotiating to purchase exclusive rights to manufacture and market a solar-powered toy car. The car's inventor has offered Simes the choice of either a one-time payment of $1,700,000 today or a series of 6 year-end payments of $400,000. a. If Simes has a cost of capital of 9%, which form of payment should it choose? b. What yearly payment would make the two offers identical in value at a cost of capital of 9%? c. What would be your answer to part a of this problem if the yearly payments were made at the beginning of each year? d. The cash inflows associated with this purchase are projected to amount to $260,000 per year for 15 years. Will this factor change the firm's decision about how to fund the initital investment? (Round to the nearest dollar.) a. If Simes has a cost of capital of 9%, the present value of the annuity is $ Which form of payment should the firm choose? (Select the best answer below.) O A. Lump sum payment OB. Annuity payment (Round to…
NPV Simes Innovations, Inc., is negotiating to purchase exclusive rights to manufacture and market a solar-powered toy car. The car's inventor has offered Simes the choice of either a one-time payment of $1,800,000 today or a series of 7 year-end payments of $350,000. a. If Simes has a cost of capital of 8%, which form of payment should it choose? b. What yearly payment would make the two offers identical in value at a cost of capital of 8%? c. What would be your answer to part a of this problem if the yearly payments were made at the beginning of each year? d. The after-tax cash inflows associated with this purchase are projected to amount to $227,500 per year for 15 years. Will this factor change the firm's decision about how to fund the initital investment? a. If Simes has a cost of capital of 8%, the present value of the annuity is $. (Round to the nearest dollar.) Which form of payment should the firm choose? (Select the best answer below.) O A. Lump sum payment B. Annuity payment…
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eBook The Lesseig Company has an opportunity to invest in one of two mutually exclusive machines that will produce a product the company will need for the next 8- years. Machine A has an after-tax cost of $9.3 million but will provide after-tax inflows of $4.1 million per year for 4 years. If Machine A were replaced, its after- tax cost would be $11.1 million due to inflation and its after-tax cash inflows would increase to $4.6 million due to production efficiencies. Machine B has an after-tax cost of $14.6 million and will provide after-tax inflows of $4.5 million per year for 8 years. If the WACC is 9%, which machine should be acquired? Explain, Enter your answers in millions. For example, an answer of $10,550,000 should be entered as 10.55. Do not round intermediate calculations. Round your answers to two decimal places. is the better project and will increase the company's value by $ Machine B created by Machine A Hide Feedback Incorrect O millions, rather than the s millions Work…
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K (Cost of short-term financing) The R. Morin Construction Company needs to borrow $100,000 to help finance the cost of a new $140,000 hydraulic crane used in the firm's commercial construction business. The crane will pay for itself in 1 year, and the firm is considering the following alternatives for financing its purchase: Alternative A-The firm's bank has agreed to lend the $100,000 at a rate of 12 percent. Interest would be discounted, and a 16 percent compensating balance would be required. However, the compensating-balance requirement would not be binding on R. Morin because the firm normally maintains a minimum demand deposit (checking account) balance of $25,000 in the bank. Alternative B-The equipment dealer has agreed to finance the equipment with a 1-year loan. The $100,000 loan would require payment of principal and interest totaling $115,560. a. Which alternative should R. Morin select? b. If the bank's compensating-balance requirement were to necessitate idle demand…
Cost of short-term financing The RMC Company needs to borrow $100,000 to help finance the cost of a new $150,000 hydraulic crane used in the firm’s commercial construction business. The crane will pay for itself in one year, and the firm is considering the following alternatives for financing its purchase: Alternative A: The firm’s bank has agreed to lend the $100,000 at a rate of 14 percent. Interest is to be discounted, and a 15 percent compensating balance is required. However, the compensating- balance requirement is not binding on the firm because it normally maintains a minimum demand deposit (checking account) balance of $25,000 in the bank. Alternative B: The equipment dealer has agreed to finance the equipment with a one-year loan. The $100,000 loan requires payment of principal and interest totaling $116,300. Which alternative should RMC Company select? If the bank’s compensating-balance requirement had necessitated idle demand deposits equal to 15 percent of the loan, what…