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? |
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Managerial Accounting
Authors: Karen W. Braun, Wendy M. Tietz
3rd edition
132890542, 978-0132890540
