Executives at Microsoft are interested to get into the drone delivery business.They decide to acquire "FLY" corporation."FLY" has been operating a drone delivery service for 4 years now and they are the most successful operators in the market. Microsoft executives offer "FLY" two purchase options: the first option is one $40 million lump sum payment. the second option is paying five annual payments of $10 million over the next five years. a)If the annual interest rate is 7% ,find the present value of both options? b) Evaluate the net present values of both option and identify which option is more cost effective for Microsoft ?
Executives at Microsoft are interested to get into the drone delivery business.They decide to acquire "FLY" corporation."FLY" has been operating a drone delivery service for 4 years now and they are the most successful operators in the market. Microsoft executives offer "FLY" two purchase options: the first option is one $40 million lump sum payment. the second option is paying five annual payments of $10 million over the next five years. a)If the annual interest rate is 7% ,find the present value of both options? b) Evaluate the net present values of both option and identify which option is more cost effective for Microsoft ?
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Executives at Microsoft are interested to get into the drone delivery business.They decide to acquire "FLY" corporation."FLY" has been operating a drone delivery service for 4 years now and they are the most successful operators in the market. Microsoft executives offer "FLY" two purchase options: the first option is one $40 million lump sum payment.
the second option is paying five annual payments of $10 million over the next five years.
a)If the annual interest rate is 7% ,find the
b) Evaluate the
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