Question

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 ​$28 comma 000 and ​$23 comma 000 at the end of years 1 and 2 and to make annual​ year-end payments of ​$18 comma 000 in years 3 through 9. A final payment to Harte of ​$30 comma 000 would be due at the end of year 10. a. Select the time line that represents the cash flows involved in the offer.

Answer 1

a. Select the time line that represents the cash flows involved in the offer.

NCF1 = $28,000

NCF2 = $23,000

NCF3 = $15,000

NCF4 = $15,000

NCF5 = $15,000

NCF6 = $15,000

NCF7 = $15,000

NCF8 = $15,000

NCF9 = $15,000

NCF10 = $30,000

If you want to compare this set of cash flows to another offer, you will need to calculate the present value first. E.g if you use a 12% discount rate, the PV of these cash flows = $107,570.