Simes Innovations, Inc., is negotiating to purchase exclusive rights to manufacture and market asolar-powered toy car. The car's inventor has offered Simes the choice of either a one-time payment of $2,200,000 today or a series of 8 year-end payments of $360,000.

1) If Simes has a cost of capital of 11%, the present value of the annuity is $______

Which form of payment should the firm choose? (select best answer)

a) Lump sum payment

b) Annuity Payment

2) The yearly payment that would make the two offers identical in value at a cost of capital of 11% is $______

3) If the yearly payments were made at the beginning of each year, the present value of the annuity is $______

Which form of payment should the firm choose if the annuity payments are paid at the beginning of each year?

a) Annuity Payment

b) Lump sum payment

4) The after-tax cash inflows associated with this purchase are projected to amount to $234,000 per year for 15 years. Will this factor change the firm's decision about how to fund the initital investment? (select best answer below)

a) No, the cash flows from the project will not influence the decision on how to fund the project. The investment and financing decisions are separate.

b) Yes, the cash flows from the project will influence the decision on how to fund the project. The investment and financing decisions are related.