Harte? Systems, Inc., a maker of electronic survillance? 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 Harte ?$32,000 and $23,000 at the end of years 1 and 2 and to make annual? year-end payments of $10,000 in years 3 through 9. A final payment to Harte of $20,000 would be due at the end of year 10.
a. If Harte applies a required rate of return of 88?% to? them, what is the present value of this series of? payments?
b. A second company has offered Harte an immediate? one-time payment of $100,000 for the rights to market the home security system. Which offer should Harte? accept?