Mr landis president of modern weapons inc was pleased that

Assignment Help Finance Basics

Reference no: EM13347639

Mr. Landis, President of Modern Weapons, Inc. was pleased that he had three offers from major companies for his latest missile firing automatic ejector. He can use a discount rate of 12 percent to compute each offer.

Offer1 :

$500,000 now plus $120,000 from the end of years 6 thru 15. And also, if the product goes over $50 million in cumulative sales by the end of year 15, he can receive an additional $1,500,000. Mr Landis thought there was a 75 percent chance this would happen.

Offer2 :

25 percent of the buyers gross margin for the next four years. The buyer in this case is Air Defense, Inc. (ADI). It's gross margin is 65 percent. Sales for year 1 are projected to be $1 million and then grow by 40 percent per year. This amount is paid today and is not discounted.

Offer3 :

A trust fund could be set up for the next nine years. At the end of that period, Mr. Landis could receive the proceeds (and discount them back to the percent 12 percent). The trust fund known as for semiannual payments for the next nine years of $80,000 (a total of $160,000 per year). The payments could start immediately. Since the payments are coming at the starting of each period instead of the end, this is an annuity due. To look up the future value in the table. Consider the annual interest rate on this annuity is 12 percent annually (6 percent semiannually). Evaluate the present value of the trust's funds value.

Determine the present value of each of the three offers and then show which one has the highest present value.

Reference no: EM13347639

Questions Cloud

Question 1 identify any organization with which you are : question 1. identify any organization with which you are familiar and provide a swot analysis.question 2. using the

Part-aq1 suppose the scenario of library management system : part-aq1 suppose the scenario of library management system. in it there are a. book no. b. name of the book. c.

Objectives to apply certain steps in the audit planning : objectives to apply certain steps in the audit planning process with emphasis on risk identification and audit response

Business economics assignmentquestion 1explain with numeral : business economics assignmentquestion 1explain with numeral example that marginal revenue is always lower than the

Mr landis president of modern weapons inc was pleased that : mr. landis president of modern weapons inc. was pleased that he had three offers from major companies for his latest

Part a clockuse a timer interrupt to design a simple : part a clockuse a timer interrupt to design a simple digital clock. this clock will count only minutes and seconds

Assignment 1problem 1determine the analytical solution for : assignment 1problem 1determine the analytical solution for the maximum stress of the beam shown compare with stress

Objectives1login to unix system and logout2learn features : objectives1.login to unix system and logout2.learn features of the vi editor and to use online help man pages. gain

Suppose the following game a player rolls two dice if the : suppose the following game. a player rolls two dice. if the outcome on both dice is the same doubles the player wins 5.

User Account

All Pages