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Determine what is the present value of series of payments

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Reference no: EM132621477

Baro Electronics PLC is considering selling to a well-known supermarket chain the right to market its electronic security system. The proposed deal calls for the supermarket chain to pay Baro Br. 10,000 and Br. 25,000 at the end of years 1 and 2 and to make annual year-end payments of Br. 25,000 in years 3 through 9. A final payment to Baro of Br. 30,000 would be due at the end of year 10. The applicable discount rate for the first two years is 12%; whereas, 15% then after for the remaining years.

Required:

Question (a) Lay out the cash flows involved in the offer on a time line

Question (b) What is the present value of this series of payments?

Question (c) A second company has offered Baro an immediate one-time payment of Br. 141,168 for the rights to market the electronic security system. Which offer should Baro accept?

Reference no: EM132621477

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