I-SEE-U Inc., a maker of CCTV cameras, is considering a hardware marketing chain to sell its cameras. As per the deal,I-SEE-U will be paid $35,000 and $10,000 at the end of years 1 and 2 and to make annual year-end payments of $5,000 in years 3 through 9. A final payment of $20,000 would be due at the end of year 10. A second company has offered to market the cameras for a one-time payment of $80,000 right away. If I-SEE-U uses a 12% required return, Which offer should it accept? Support your asnwer with relavent calculations.

I-SEE-U Inc., a maker of CCTV cameras, is considering a hardware marketing chain to sell its cameras. As per the deal,I-SEE-U will be paid $35,000 and $10,000 at the end of years 1 and 2 and to make annual year-end payments of $5,000 in years 3 through 9. A final payment of $20,000 would be due at the end of year 10. A second company has offered to market the cameras for a one-time payment of $80,000 right away. If I-SEE-U uses a 12% required return, Which offer should it accept? Support your asnwer with relavent calculations.

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter19: Lease And Intermediate-term Financing

Section: Chapter Questions

Problem 19P

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I-SEE-U Inc., a maker of CCTV cameras, is considering a hardware marketing chain to sell its cameras. As per the deal, I-SEE-U will be paid $35,000 and $10,000 at the end of years 1 and 2 and to make annual year-end payments of $5,000 in years 3 through 9. A final payment of $20,000 would be due at the end of year 10. A second company has offered to market the cameras for a one-time payment of $80,000 right away. If I-SEE-U uses a 12% required return, Which offer should it accept?Show calculations with a financial calculator
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