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 $29,000 at 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?
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 $29,000 at 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?
Survey of Accounting (Accounting I)
8th Edition
ISBN:9781305961883
Author:Carl Warren
Publisher:Carl Warren
Chapter15: Capital Investment Analysis
Section: Chapter Questions
Problem 15.21E
Related questions
Question
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 $29,000
at the end of years 1 and 2 and to make annual year-end payments of
at 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?
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 2 steps with 1 images
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.Recommended textbooks for you
Survey of Accounting (Accounting I)
Accounting
ISBN:
9781305961883
Author:
Carl Warren
Publisher:
Cengage Learning
Managerial Accounting
Accounting
ISBN:
9781337912020
Author:
Carl Warren, Ph.d. Cma William B. Tayler
Publisher:
South-Western College Pub
Survey of Accounting (Accounting I)
Accounting
ISBN:
9781305961883
Author:
Carl Warren
Publisher:
Cengage Learning
Managerial Accounting
Accounting
ISBN:
9781337912020
Author:
Carl Warren, Ph.d. Cma William B. Tayler
Publisher:
South-Western College Pub
Fundamentals of Financial Management (MindTap Cou…
Finance
ISBN:
9781337395250
Author:
Eugene F. Brigham, Joel F. Houston
Publisher:
Cengage Learning