Value of a mixed stream Harte Systems, Inc., a maker of electronic survillance equipment, is considering selling the rights to market its home security system to a well-known hardware chain. The proposed deal calls for the hardware chain to pay Harte $34,000 and $29,000 at the end of years 1 and 2 and to make annual year-end payments of $14,000 in years 3 through 9. A final payment to Harte of $10,000 would be due at the end of year 10. . Select the time line that represents the cash flows involved in the offer. . If Harte applies a required rate of return of 9% to them, what is the present value of this series of payments? c. A second company has offered Harte an immediate one-time payment of $120,000 for the rights to market the home security system. Which offer should Harte accept? . Which of the following time lines represents the cash flows involved in the offer? (Select the best answer below.) OA. 0 1 2 3 OB. OC. OD. 0 0 0 $10,000 $14,000 1 2 $34,000 1 $29,000-$14,000 2 $29,000 3 $34,000 $29,000 1 2 3 $14,000 3 -$34,000-$29,000-$14,000 9 10 $29,000 $34,000 9 10 -$14,000 $10,000 9 10 $14,000 $10,000 9 10 -$14,000-$10,000
Value of a mixed stream Harte Systems, Inc., a maker of electronic survillance equipment, is considering selling the rights to market its home security system to a well-known hardware chain. The proposed deal calls for the hardware chain to pay Harte $34,000 and $29,000 at the end of years 1 and 2 and to make annual year-end payments of $14,000 in years 3 through 9. A final payment to Harte of $10,000 would be due at the end of year 10. . Select the time line that represents the cash flows involved in the offer. . If Harte applies a required rate of return of 9% to them, what is the present value of this series of payments? c. A second company has offered Harte an immediate one-time payment of $120,000 for the rights to market the home security system. Which offer should Harte accept? . Which of the following time lines represents the cash flows involved in the offer? (Select the best answer below.) OA. 0 1 2 3 OB. OC. OD. 0 0 0 $10,000 $14,000 1 2 $34,000 1 $29,000-$14,000 2 $29,000 3 $34,000 $29,000 1 2 3 $14,000 3 -$34,000-$29,000-$14,000 9 10 $29,000 $34,000 9 10 -$14,000 $10,000 9 10 $14,000 $10,000 9 10 -$14,000-$10,000
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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Question
Transcribed Image Text:Value of a mixed stream
at the end of years 1 and 2
Harte Systems, Inc., a maker of electronic survillance equipment, is considering selling the rights to market its home security system to a well-known hardware chain. The proposed deal calls for the hardware chain to pay Harte $34,000 and $29,000
and to make annual year-end payments of $14,000 in years 3 through 9. A final payment to Harte of $10,000 would be due at the end of year 10.
a. Select the time line that represents the cash flows involved in the offer.
b. If Harte applies a required rate of return of 9% to them, what is the present value of this series of payments?
c. A second company has offered Harte an immediate one-time payment of $120,000 for the rights to market the home security system. Which offer should Harte accept?
a. Which of the following time lines represents the cash flows involved in the offer? (Select the best answer below.)
3
+
$10,000 $14,000 $29,000
2
O A.
O B.
O C.
O D.
0
0
0
0
1
1
2
3
$34,000 $29,000 - $14,000
1
2
1
3
$34,000 $29,000 $14,000
2
+
- $34,000-$29,000-$14,000
3
+
9
10
$29,000
9
+
- $14,000 $10,000
10
9
$34,000
10
$14,000 $10,000
9
10
+
-$14.000-$10,000
C
Expert Solution
Step 1: Cash flow timeline:
When a timeline, i.e., the period at which a cash flow occurs is shown in an illustrated form to provide more clarity to the investors is known as the cash flow timeline. This will depict both cash inflows and outflows with positive and negative figures.
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