Schumacher has invented a business simulation called Drivepast which can be played on a personal computer. He is considering three different proposals via which to exploit the product.

Proposal 1- Sell all the rights in the game to a local computer company, Keypoint Limited. for the sum of E40,000 outright.

Proposal 2 – Sell all the rights in the game to Keypoint Ltd. for five annual amounts of E14,000 payable to him on the basis of one payment at the end of the year and the other four at yearly intervals, thereafter.

Proposal 3 – Set up a manufacturing company to produce and market the game. Schumacher estimates that the following data would be relevant over a period of the next five years:

The working capital would be recovered at the end of year five and the plant will have a re-sale value of 10,000 euros. This proposal, if implemented, would also mean that Schumacher would need to give up his present employment.

Required:

(a) Consider each of the proposals and advise Schumacher on the relative merits of these proposals in financial terms. He has told you that his target rate of return is 12%. Your calculations should be made to the nearest whole E. Discount factors at 12% are as below

(b) Advise Schumacher on what other factors he should also consider before making a final decision.

Click on Buy Solution and make payment. All prices shown above are in USD. Payment supported in all currencies. Price shown above includes the solution of all questions mentioned on this page. Please note that our prices are fixed (do not bargain).

After making payment, solution is available instantly.Solution is available either in Word or Excel format unless otherwise specified.

If your question is slightly different from the above question, please contact us at info@myassignmentguru.com with your version of question.