P532 Value of a mixed stream Harte Systems, Inc., a maker of electronic surveillance equipment, is considering

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P5–32 Value of a mixed stream Harte Systems, Inc., a maker of electronic surveillance equipment, is considering selling to a well-known hardware chain the rights to market its home security system. The proposed deal calls for the hardware chain to pay Harte $30,000 and $25,000 at the end of years 1 and 2 and to make annual yearend payments of $15,000 in years 3 through 9. A final payment to Harte of $10,000 would be due at the end of year 10.

a. Lay out the cash flows involved in the offer on a time line.

b. If Harte applies a required rate of return of 12% 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

$100,000 for the rights to market the home security system. Which offer should Harte accept?

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Principles Of Managerial Finance

ISBN: 9780133546408

7th Edition

Authors: Lawrence J Gitman, Chad J Zutter

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