What is the present value of the series of payments

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Present value of a mixed stream:

Harte Systems, Inc., a maker of electronic surveillance equipment, is considering selling to a well-known hardware chain the rights to market its home security system. The proposed deal calls for payments of $30,000 and $25,000 at the end of years 1 and 2 and for annual year-end payments of $15,000 in years 3 through 9. A final payment of $10,000 would be due at the end of year 10.

Required:

Question a. Lay out the cash flows involved in the offer on a timeline.

Question b. If Harte applies a required rate of return of 12% to them, what is the present value of this series of payments?

Question c. A second company has offered Harte a one-time payment of $100,000 now for the rights to market the home security system. Which offer should Harte accept?

Reference no: EM132499297

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