I ONLY NEED #2 Solved. Questions 1 and 2 are connected, I only need #2 The rights to Michael Johnson's cinematic masterpiece “La Strada” are to be auctioned. You forecast that you can collect annual cash flows in the form of royalties, net of taxes, as shown in the table below. At the end of the forecast horizon, you plan to sell the rights in a future auction. You forecast you can get $1,750,000 for the rights, after taxes, at the end of year 5. If your target rate of return is 12%, what is the maximum price you should offer for the rights? Year 1 2 3 4 5 Annual Cash Flow $350,000 $380,000 $400,000 $450,000 $480,000 Auction Proceeds $1,750,000 2. With reference to question 4, rather than auction the rights at the end of year 5, the alternative is to retain the rights. You forecast that beginning in year 6, the film will provide cash flows of $500,000 in perpetuity. What is the maximum price you should offer for the rights
I ONLY NEED #2 Solved. Questions 1 and 2 are connected, I only need #2 The rights to Michael Johnson's cinematic masterpiece “La Strada” are to be auctioned. You forecast that you can collect annual cash flows in the form of royalties, net of taxes, as shown in the table below. At the end of the forecast horizon, you plan to sell the rights in a future auction. You forecast you can get $1,750,000 for the rights, after taxes, at the end of year 5. If your target rate of return is 12%, what is the maximum price you should offer for the rights? Year 1 2 3 4 5 Annual Cash Flow $350,000 $380,000 $400,000 $450,000 $480,000 Auction Proceeds $1,750,000 2. With reference to question 4, rather than auction the rights at the end of year 5, the alternative is to retain the rights. You forecast that beginning in year 6, the film will provide cash flows of $500,000 in perpetuity. What is the maximum price you should offer for the rights
Chapter10: Capital Budgeting: Decision Criteria And Real Option
Section: Chapter Questions
Problem 4P
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I ONLY NEED #2 Solved. Questions 1 and 2 are connected, I only need #2
- The rights to Michael Johnson's cinematic masterpiece “La Strada” are to be auctioned. You
forecast that you can collect annual cash flows in the form of royalties, net of taxes, as shown in the table below. At the end of the forecast horizon, you plan to sell the rights in a future auction. You forecast you can get $1,750,000 for the rights, after taxes, at the end of year 5. If your targetrate of return is 12%, what is the maximum price you should offer for the rights?
|
Year |
1 |
2 |
3 |
4 |
5 |
|
Annual Cash Flow |
$350,000 |
$380,000 |
$400,000 |
$450,000 |
$480,000 |
|
Auction Proceeds |
|
|
|
|
$1,750,000 |
2. With reference to question 4, rather than auction the rights at the end of year 5, the alternative is to retain the rights. You forecast that beginning in year 6, the film will provide cash flows of $500,000 in perpetuity. What is the maximum price you should offer for the rights
* PLEASE SOLVE USING EXCEL (no calculator) and show what formulas/function you used,, thank you*
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