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Falkland, Inc., is considering the purchase of a patent that has a cost of $51,000 and an estimated revenue producing life of 4 years.

 

Falkland, Inc., is considering the purchase of a patent that has a cost of $51,000 and an estimated revenue producing life of 4 years. Falkland has a cost of capital of 10%. The petent is expected to generate the following amounts of annual income and cash flows: Year 1 Year 2 Year 3 Year 4 Net income $5,100 $6,500 Operating cash flows 17,000 18,300 (Click here to see present value and future value tables) A. What is the NPV of the investment? Round your present value factor to three decimal places and final answer to the nearest dollar. $6,300 18,000 B. What happens if the required rate of return increases? $3,000 14,950

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