5. The patent holder of a new invention, the Robovac (a robot vacuum cleaner), has offered to...
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5. The patent holder of a new invention, the Robovac (a robot vacuum cleaner), has offered to sell you the patent. The patent lasts 5 years, and you expect that tooling up for production will cost 20 million but that this will earn you a profit of 10 million in the first year. You expect sales to be roughly the same in each year, but do not expect any profit after the 5 years are up. If your money discount rate is 15% and inflation is 4%, what is the maximum sum you would be willing to pay for the patent rights? (Assume the rates hold constant over the 5-year time interval.)
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Managerial Economics Firms Markets And Business Decisions
ISBN: 9780198775706
1st Edition
Authors: Ian M. Dobbs
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