1. 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 $1,500,000 today or a series of 5 year-end payments of $385,000. a. If Simes has a cost of capital of 9%, which form of payment should the company choose? b. What yearly payment would make the two offers identical in value at a cost of capital of 9%? c. Would your answer to part a of this problem be different if the yearly payments were made at the beginning of each year? Show what difference, if any, that change in timing would make to the present value calculation. d. The after-tax cash inflows associated with this purchase are projected to amount to $250,000 per year for 15 years. Will this factor change the firm's decision about how to fund the initial investment? 2. Rieger International is attempting to evaluate the feasibility of investing $95,000 in a piece of equipment that has a 5-year life. The firm has estimated the cash inflows associated with the proposal as shown in the following table. The firm has a 12% cost of capital. Year (t) Cash inflows (CFt) $20,000 25,000 30,000 35,000 40,000 a. Calculate the payback period for the proposed investment. b. Calculate the net present value (NPV) for the proposed investment. 3. Pound Industries is attempting to select the best of three mutually exclusive projects. The initial investment and after-tax cash inflows associated with these projects are shown in the following table. 1 2 3 4 5 Cash flows Project A Project B Project C Initial investment (CFO) $60,000 $100,000 $110,000 Cash inflows (CFD),t1 to 5 $20,000 $ 31,500 $ 32,50 a. Calculate the payback period for each project. b. Calculate the net present value (NPV) of each project, assuming that the firm has a cost of capital equal to 13%