ITC is a small technology company that develops financial technology (FinTech) applications for mobile devices. The...
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ITC is a small technology company that develops financial technology (FinTech) applications for mobile devices. The company is selling one of its highly-rated FinTech apps to a financial institution. The financial institution has proposed the following strategic payment options for ITC's consideration: Strategy 1: An immediate payment of Tk. 1.2 million followed by payments of Tk. 50,000 at the end of each quarter during the next five years. Strategy 2: Payment of Tk. 55,000 at the beginning of each month for the next five years. ITC's required rate of return is 25% per annum. Required: (1) Identify the type of cash flow pattern described under each option. (11) Compute the present value of the cash flows for each strategy and advise ITC on the best payment option. ITC is a small technology company that develops financial technology (FinTech) applications for mobile devices. The company is selling one of its highly-rated FinTech apps to a financial institution. The financial institution has proposed the following strategic payment options for ITC's consideration: Strategy 1: An immediate payment of Tk. 1.2 million followed by payments of Tk. 50,000 at the end of each quarter during the next five years. Strategy 2: Payment of Tk. 55,000 at the beginning of each month for the next five years. ITC's required rate of return is 25% per annum. Required: (1) Identify the type of cash flow pattern described under each option. (11) Compute the present value of the cash flows for each strategy and advise ITC on the best payment option.
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Answer rating: 100% (QA)
Cash Flow Analysis for ITCs Payment Options i Cash Flow Pattern Identification Strategy 1 This optio... View the full answer
Related Book For
Accounting
ISBN: 978-1118608227
9th edition
Authors: Lew Edwards, John Medlin, Keryn Chalmers, Andreas Hellmann, Claire Beattie, Jodie Maxfield, John Hoggett
Posted Date:
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