Value of a mixed streamHarte 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 $28,000 and $29,000 at the end of years 1 and 2 and to make annual year-end payments of $14,000 in years 3 through 9. A final payment to Harte of $30,000

would be due at the end of year 10.

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

b.If Harte applies a required rate of return of 9% to them, what is the present value of this series of payments?

c.A second company has offered Harte an immediate one-time payment of $120,000 for the rights to market the home security system. Which offer should Harte accept?

Question content area bottom

Part 1

a.Which of the following time lines represents the cash flows involved in the offer?(Select the best answer below.)

A.The image is a timeline that shows the cash flows for Harte Systems Inc. The timeline starts at Year 0 and ends at Year 10. The timeline shows positive cash flows from Year 1 to Year 10. The cash flow for Year 1 is $30,000 and for Year 2 is $14,000. The cash flow from Year 3 to Year 9 is $29,000. The cash flow for Year 10 is $28,000.

0

1

2

3

9

10

$30,000

$14,000

$29,000

$29,000

$28,000

B.The image is a timeline that shows the cash flows for Harte Systems Inc. The timeline starts at Year 0 and ends at Year 10. The timeline shows positive cash flows from Year 1 to Year 10. The cash flow for Year 1 is $28,000 and for Year 2 is $29,000. The cash flow from Year 3 to Year 9 is $14,000 each. The cash flow for Year 10 is $30,000.

0

1

2

3

9

10

$28,000

$29,000

$14,000

$14,000

$30,000

C.The image is a timeline that shows the cash flows for Harte Systems Inc. The timeline starts at Year 0 and ends at Year 10. The timeline shows a positive cash flow of $28,000 for Year 1 is and $29,000 for Year 2. The timeline shows negative cash flows of $14,000 from Year 3 to Year 9. The timeline shows a positive cash flow of $30,000 for Year 10.

0

1

2

3

9

10

$28,000

$29,000

$14,000

$14,000

$30,000

D.The image is a timeline that shows the cash flows for Harte Systems Inc. The timeline starts at Year 0 and ends at Year 10. The timeline shows negative cash flows from Year 1 to Year 10. The cash flow for Year 1 is minus $28,000 and for Year 2 is minus $29,000. The cash flow from Year 3 to Year 9 is minus $14,000. The cash flow for Year 10 is minus $30,000.

0

1

2

3

9

10

$28,000

$29,000

$14,000

$14,000

$30,000

Part 2

b. The present value of the mixed stream of cash flows involved in the offer is

$enter your response here.

(Round to the nearest dollar.)

Part 3

c.Which offer should Harte accept?(Select the best answer below.)

A.

Immediate one-time payment offer

B.