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ries of 6 year-end payments of $400,000. If Simes has a cost of capital of 9%, which form of payment should it choose? What yearly payment would make the two offers identical in value at a cost of capital of 9%? What would be your answer to part a of this problem if the yearly payments were made at the beginning of each year? The cash inflows associated with this purchase are projected to amount to $260.000 per year for 15 years. Will this factor change the firm's decision about REITE If Simes has a cost of capital of 9%, the present value of the annuity is $ (Round to the nearest dollar.) hich form of payment should the firm choose? (Select the best answer below.) OA. Lump sum payment

ries of 6 year-end payments of $400,000. If Simes has a cost of capital of 9%, which form of payment should it choose? What yearly payment would make the two offers identical in value at a cost of capital of 9%? What would be your answer to part a of this problem if the yearly payments were made at the beginning of each year? The cash inflows associated with this purchase are projected to amount to $260.000 per year for 15 years. Will this factor change the firm's decision about REITE If Simes has a cost of capital of 9%, the present value of the annuity is $ (Round to the nearest dollar.) hich form of payment should the firm choose? (Select the best answer below.) OA. Lump sum payment

Essentials Of Investments
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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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 $1,700,000 today or a series of 6 year-end payments of $400,000. a. If Simes has a cost of capital of 9%, which form of payment should it choose? b. What yearly payment would make the two offers identical in value at a cost of capital of 9%? 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 cash inflows associated with this purchase are projected to amount to $260,000 per year for 15 years. Will this factor change the firm's decision about how to fund the initital investment? (Round to the nearest dollar.) a. If Simes has a cost of capital of 9%, the present value of the annuity is $ Which form of payment should the firm choose? (Select the best answer below.) O A. Lump sum payment OB. Annuity payment (Round to the nearest dollar) b. The yearly payment that would make the two offers identical in value at a cost of capital of 9% is $
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 $1,700,000 today or a series of 6 year-end payments of $400,000. a. If Simes has a cost of capital of 9%, which form of payment should it choose? b. What yearly payment would make the two offers identical in value at a cost of capital of 9%? 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 cash inflows associated with this purchase are projected to amount to $260,000 per year for 15 years. Will this factor change the firm's decision about how to fund the initital investment? (Round to the nearest dollar.) a. If Simes has a cost of capital of 9%, the present value of the annuity is $ Which form of payment should the firm choose? (Select the best answer below.) O A. Lump sum payment OB. Annuity payment (Round to the nearest dollar) b. The yearly payment that would make the two offers identical in value at a cost of capital of 9% is $
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