Question 1:I-SEE-U Inc., a maker of CCTV cameras, is considering a hardwaremarketing chain to sell its cameras. As per the deal,I-SEE-U will bepaid $35,000 and $10,000 at the end of years 1 and 2 and to makeannual year-end payments of $5,000 in years 3 through 9. A finalpayment of $20,000 would be due at the end of year 10.A second company has offered to market the cameras for a one-timepayment 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.
Question 1:I-SEE-U Inc., a maker of CCTV cameras, is considering a hardwaremarketing chain to sell its cameras. As per the deal,I-SEE-U will bepaid $35,000 and $10,000 at the end of years 1 and 2 and to makeannual year-end payments of $5,000 in years 3 through 9. A finalpayment of $20,000 would be due at the end of year 10.A second company has offered to market the cameras for a one-timepayment 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.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Question 1:
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.
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