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Question 14 (Ignore income taxes in this problem.) A newly developed device is being considered by Fairway Foods for use in processing and canning peaches.
Question 14 (Ignore income taxes in this problem.) A newly developed device is being considered by Fairway Foods for use in processing and canning peaches. The device, which is available only on a royalty basis, is reported to be a great labor saver. Fairway's production manager has gathered the following data: Per year: Current Proposed Labor cost $ 40,000 $5,000 Royalty cost $ 20,000 Initial startup costs associated with new device $ 100,000 The new device must be obtained through a licensing arrangement with the developer The license period lasts for only 8 years. Fairway Foods' required rate of return is 10% Compute the net present value of the proposed licensing of the new device. Show all computations in good form. Should the company enter into a licensing arrangement to use the new device
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