NPV Simes Innovations, Inc., is negotiating to purchase exclusive rights to manufacture and market a solar-powered toy car. The car's inventor has offered Simes the choice of either a one-time payment of $1,800,000 today or a series of 6 year-end payments of $385,000. b. What yearly payment would make the two offers identical in value at a cost of capital of 13%? c. What would be your answer to part a of this problem if the yearly payments were made at the beginning of each year? d. The after-tax cash inflows associated with this purchase are projected to amount to $250,250 per year for 15 years. Will this factor change the firm's decision about how to fund the initital investment? a. If Simes has a cost of capital of 13%, the present value of the annuity is $. (Round to the nearest dollar.) Which form of payment should the firm choose? (Select the best answer below.) O A. Annuity payment O B. Lump sum payment b. The yearly payment that would make the two offers identical in value at a cost of capital of 13% is $ (Round to the nearest dollar.) c. If the yearly payments were made at the beginning of each year, the present value of the annuity is $. (Round to the nearest dollar.) Which form of payment should the firm choose if the annuity payments are paid at the beginning of each year? (Select the best answer below.) O A. Annuity payment O B. Lump sum payment d. The after-tax cash inflows associated with this purchase are projected to amount to $250,250 per year for 15 years. Will this factor change the firm's decision about how to fund the initital investment? (Select the best answer below.) O A. No, the cash flows from the project will not influence the decision on how to fund the project. The investment and financing decisions are separate. O B. Yes. the cash flows from the proiect will influence the decision on how to fund the proiect. The investment and financina decisions are related.

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
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NPV Simes Innovations, Inc., is negotiating to purchase exclusive rights to manufacture and market a solar-powered toy car. The car's inventor has offered Simes the choice of either a one-time payment of $1,800,000 today or a series of 6
year-end payments of $385,000.
b. What yearly payment would make the two offers identical in value at a cost of capital of 13%?
c. What would be your answer to part a of this problem if the yearly payments were made at the beginning of each year?
d. The after-tax cash inflows associated with this purchase are projected to amount to $250,250 per year for 15 years. Will this factor change the firm's decision about how to fund the initital investment?
a. If Simes has a cost of capital of 13%, the present value of the annuity is $. (Round to the nearest dollar.)
Which form of payment should the firm choose? (Select the best answer below.)
O A. Annuity payment
O B. Lump sum payment
b. The yearly payment that would make the two offers identical in value at a cost of capital of 13% is $
(Round to the nearest dollar.)
c. If the yearly payments were made at the beginning of each year, the present value of the annuity is $. (Round to the nearest dollar.)
Which form of payment should the firm choose if the annuity payments are paid at the beginning of each year? (Select the best answer below.)
O A. Annuity payment
O B. Lump sum payment
d. The after-tax cash inflows associated with this purchase are projected to amount to $250,250 per year for 15 years. Will this factor change the firm's decision about how to fund the initital investment? (Select the best answer below.)
O A. No, the cash flows from the project will not influence the decision on how to fund the project. The investment and financing decisions are separate.
O B. Yes. the cash flows from the proiect will influence the decision on how to fund the proiect. The investment and financina decisions are related.
Transcribed Image Text:NPV Simes Innovations, Inc., is negotiating to purchase exclusive rights to manufacture and market a solar-powered toy car. The car's inventor has offered Simes the choice of either a one-time payment of $1,800,000 today or a series of 6 year-end payments of $385,000. b. What yearly payment would make the two offers identical in value at a cost of capital of 13%? c. What would be your answer to part a of this problem if the yearly payments were made at the beginning of each year? d. The after-tax cash inflows associated with this purchase are projected to amount to $250,250 per year for 15 years. Will this factor change the firm's decision about how to fund the initital investment? a. If Simes has a cost of capital of 13%, the present value of the annuity is $. (Round to the nearest dollar.) Which form of payment should the firm choose? (Select the best answer below.) O A. Annuity payment O B. Lump sum payment b. The yearly payment that would make the two offers identical in value at a cost of capital of 13% is $ (Round to the nearest dollar.) c. If the yearly payments were made at the beginning of each year, the present value of the annuity is $. (Round to the nearest dollar.) Which form of payment should the firm choose if the annuity payments are paid at the beginning of each year? (Select the best answer below.) O A. Annuity payment O B. Lump sum payment d. The after-tax cash inflows associated with this purchase are projected to amount to $250,250 per year for 15 years. Will this factor change the firm's decision about how to fund the initital investment? (Select the best answer below.) O A. No, the cash flows from the project will not influence the decision on how to fund the project. The investment and financing decisions are separate. O B. Yes. the cash flows from the proiect will influence the decision on how to fund the proiect. The investment and financina decisions are related.
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