Please value the company with a dcf analysis, Other Management

Assignment Help:

LogicSoft Inc., a start-up that provides enterprise logistic software to transportation companies, is in negotiations with a new customer for a sales contract.  The software is highly customized and thus requires consultants to implement the software.  Developed 2 years ago, the base software was created by a core team of 10 programming engineers at a cost of $1.5 million. LogicSoft's workforce is currently 100% utilized and thus would be required to hire an additional 15 programmers in order to perform the implementation.  The full cost of each worker is expected to be $75,000, and the company expects them to work on other projects after the 2-year implementation effort.  In addition to the cost of the software and implementation, LogicSoft would also provide upgrades, updates, and maintenance for the 3 years following the successful implementation, which would cost LogicSoft $50,000 per year.   The potential customer has made a final offer with the following structure:

  • $2,200,000 for the software including implementation (50% paid up-front, 50% paid upon completion of the implementation)
  • $100,000 for the 3 years of upgrades and maintenance, payable at the end of the 3rd year, $300,000 in total.

LogicSoft also requires customers to keep the pricing of the arrangement confidential. Therefore this contract would not have any impact on the pricing of future sales.  LogicSoft's cost of capital is 15%.  The company is barely profitably, therefore is not generating any material taxable income, or losses to be carried forward.

  1. Please value the company with a DCF analysis. Should LogicSoft accept the contract?
  2. If the entire $2.2 million fee is paid at the end of the implementation, should LogicSoft accept then?

 


Related Discussions:- Please value the company with a dcf analysis

State and explain fully the capital asset pricing model, QUESTION (i) S...

QUESTION (i) State and explain fully the Capital Asset Pricing Model (CAPM) (ii) An asset X has an expected return of 20%. The risk free rate is 6%. Find the expected return

Meaning and Purpose of Education, What is the meaning and Purpose of Educat...

What is the meaning and Purpose of Education in this age of technological advancement?

Quality assurance plan, Q uality assurance plan The quality assurance ...

Q uality assurance plan The quality assurance plan is to establish the goals, the process and the responsibilities needed to implement the effective quality assurance function

Problems of dds and role of internation organisation, PROBLEMS OF DDS AND R...

PROBLEMS OF DDS AND ROLE OF INTERNATION ORGANISATION: Copyright issues, non-availability of publications and restrictions imposed on the storage and delivery of documents elec

Entry - definition, What is an Entry? An entry is a record of informat...

What is an Entry? An entry is a record of information for a specific purpose. This information is entered into a ' kind of a record. Suppose you have the habit of recording in

Define unemployment, QUESTION 1 According to Archie Caroll, explain the...

QUESTION 1 According to Archie Caroll, explain the four levels of corporate social responsibility. How far is the model relevant to the Mauritian context? Use appropriate examp

Tangible and intangible accomplishments which the erp brings, QUESTION ...

QUESTION Suppose you are the Chief Information Officer (CIO) of a multi-national organization and you are making a case to the organization's management for the implementation

State five objectives that the ppa 2006 aims to achieve, QUESTION The P...

QUESTION The Public Procurement Act 2006 (PPA 2006) is a modern procurement legislation based on UNCITRAL Model Law. PPA 2006 was enacted in 2006 and came into force in 2008. A

Define the term safety culture, Question 1: (a) The accident rate of t...

Question 1: (a) The accident rate of two companies of similar size and producing identical product is found to differ. Explain possible reasons for this difference. (b) Th

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd