Cash inflows associated with this purchase

Reference no: EM131117766

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 $1,500,000 today or a series of five year-end payments of $385,000.

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. The after-tax cash inflows associated with this purchase are projected to amount to $250,000 per year for 15 years. Will this factor change the firm's decision about how to fund the initial investment?

Reference no: EM131117766

Questions Cloud

Explain the potential impact on health care professionals : Examine the "dreams" and the "nightmares" the authors associate with this type of integrated health record. Select one benefit or one challenge of integrating PHRs into EHR platforms. Then, consider its potential impact on health care providers an..

Create an implementation plan to integrate business analytic : Create an implementation plan to integrate business analytics into your organization. Describe the business and provide a summary of the business analytics they could apply to their business in multiple scenarios.

Question regarding the cost of borrowing in cash : Calculate the difference between cost of borrowing in cash and cost of borrowing in gold (in dollar amount). Note in calculating the difference, deduct the cost of borrowing in gold from the cost of borrowing in cash. All rates are quoted in conti..

How can the team hedge its position : How can the team hedge its position? What is there to lose by waiting 3 months to see if the exhibition game is approved before hedging?

Cash inflows associated with this purchase : 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 $1,500,000 today or a series of five year-end ..

Risk neutral probability for the up move in first step : Find the following by assuming monthly compounding. Find the risk neutral probability for the up move in first step.

Managing partner of a prestigious investment counseling firm : You are P. J. Walter, CFA, a managing partner of a prestigious investment counseling firm that specializes in individual rather than institutional accounts. The firm has developed a national reputation for its ability to blend modern portfolio the..

Create a world with an old-fashioned phonograph : Create a world with an old-fashioned phonograph (Objects) in it. Create methods to turn the crank and turn the record. Then, create the BDE control mechanism (Tips & Techniques 7) to call a method that plays the record at the same time the crank i..

Explain which is the most likely diagnosis for the patient : Explain which is the most likely diagnosis for the patient and why. Include an explanation of unique characteristics of the disorder you identified as the primary diagnosis.

User Account

All Pages