Anderson Inc: Economics of Royalty Assignment Anderson Inc., is a startup company that designs, manufactures, and distributes environment friendly iPhone covers, Pat, the CEO of Anderson, was selected to present at the Dragon's Den TV show. Pat pitched the company at the show. She offered 10% equity stake in the company in return for $100,000 in investment, Investors were impressed by the presentation and three of them made offers. Jim was willing to give $100,000 in return for 40% equity stake. Kevin offered to give $100,000 for 10% royalty on all sales and was willing to have no equity in return. Arlene offered to give $100,000 for 2% royalty on all sales and 10% equity stake Pat called you during the show and consulted you to figure out which one of the dragon's offer was the most economical for the company. Since you had helped Pat with preparing financials for Anderson, you have access to the latest income statement of Anderson as shown below: Anderson Inc., Income Statement Revenue Sales 500000 Expenses- Variable COGS 274000 Gross profit 226000 SG&A Salaries 60000 Advertising 48000 Insurance Premiums 12000 Utilities 2400 Maintenance 2000 Accounting Services 2000 Office Supplies 1000 Miscellaneous 6000 Total EBITDA Depreciation EBIT Interest EBIT Taxes EAT or NI 133400 92600 31400 61200 0 61200 21420 39780 Using the above information answer the following A) Calculate the expected payout to Jim, Kevin and Arlene given their offers. Hint: You can calculate payout to each for $100 sales B) Among the three scenarios whose offer would you recommend Pat should accept and why Cleadly state any assumptions you need to make