Npv simes innovations inc is negotiating to purchase

Assignment Help Corporate Finance

Reference no: EM13381286

NPV Simes innovations, Inc., is negotiating to purchase exclusive rights to manufacture and market a solar-powered toy car. To acquire the rights, the car's inventor has given Simes the choice of making either a one-time payment of $1,875,000 today or a series of 5 year-end payments of $481,250. In either case the payments would be treated as an operating expense. Simes' tax rate is 20 percent, while their cost of capital is 9 percent.

a. Which payment option should the company choose?

b. What yearly payment would make the two offers identical?

c. Would your answer to part a be different if the yearly payments were made at the beginning of each year? Show your work.

d. If Simes acquires the rights to the car, the new project will result in incremental before-tax cash inflows of $312,500 per year for 15 years. Will this factor change the firm's decision as to how to acquire the rights to the car? Explain?

Reference no: EM13381286

Questions Cloud

1 many think that owning bonds is not risky list and : 1. many think that owning bonds is not risky. list and briefly explain two specific reasons why owning bonds is

1 explain why the volatility ie instability of a firms : 1. explain why the volatility i.e. instability of a firms input and operating costs over time might be a critical

Question 1sunk costs and opportunity costs masters golf : question 1sunk costs and opportunity costs. masters golf products inc. spent 3 years and 1000000 to develop its new

All techniques conflicting rankingsnbsp nicholson roofing : all techniques conflicting rankings.nbsp nicholson roofing materials inc. is considering two mutually exclusive

Npv simes innovations inc is negotiating to purchase : npv simes innovations inc. is negotiating to purchase exclusive rights to manufacture and market a solar-powered toy

Cost of reinvested profits versus new common shares - dvm : cost of reinvested profits versus new common shares - dvm. using the data for each firm shown in the following table

Question 1cost of debtnbsp for each of the following bonds : question 1cost of debt.nbsp for each of the following bonds calculate the after-tax cost of debt.nbsp assume the

Question 1required returns stock a has a beta of 080 stock : question 1required returns . stock a has a beta of 0.80 stock b has a beta of 1.40 and stock c has a beta of -0.30.nbsp

Calculating returns and risknbsp on january 2 2001 you : calculating returns and risk.nbsp on january 2 2001 you purchased 500 shares of loewen group for 9.60 per share. the

User Account

All Pages