AMA 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 AMA $30,000 and $25,000 at the end of years 1 and 2 and to make annual year-end payments of $15,000 in years 3 through 9. A final payment to AMA 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 AMA 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 AMA an immediate one-time payment of $100,000 for the rights to market the home security system. Which offer should AMA accept?

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