Question
Mason, Inc., is considering the purchase of a patent that has a cost of $85,000 and an estimated revenue producing life of 4 years. Mason
Mason, Inc., is considering the purchase of a patent that has a cost of $85,000 and an estimated revenue producing life of 4 years. Mason has a required rate of return that is 12% and a cost of capital of 11%. The patent is expected to generate the following amounts of annual income and cash flows: year 1 year2 year3 year 4 Net income $6,900 $9,600 $3,000 $6,300 Operating cash flows $19,500 $18,700 $20,250 $15,900 What is the NPV of the investment? What is the IRR of the investment? Should the company invest in it?
| year 1 | year2 | year3 | year 4 | |
| Net income | $6,900 | $9,600 | $3,000 | $6,300 |
| Operating cash flows | $19,500 | $18,700 | $20,250 | $15,900 |
| What is the NPV of the investment? | ||||
| What is the IRR of the investment? | ||||
| Should the company invest in it? |
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started
Advanced Accounting
Authors: Floyd A. Beams, Joseph H. Anthony, Bruce Bettinghaus, Kenneth Smith
12th edition
133451860, 978-0133451863
