Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Saul Hubson has a novel idea to embed diodes into his new model of electric guitars but discovered that Fretlite, Inc. has a patent related

Saul Hubson has a novel idea to embed diodes into his new model of electric guitars but discovered that Fretlite, Inc. has a patent related to his idea. Saul can get a ten-year license of the patent for a one-time fee of $425,000. He is convinced that this new diode model guitar will earn a revenue of $85,000 per year. While the diodes will add material cost, it will be negated because more guitars will be sold allowing them to buy wood at a volume discount. Because the manufacturing process is more complex, he will need to send the employees once each year to Fretlite at a cost of $3,100 per year and is to increase $400 per year. At the end of the ten-year license, Fretlite will pay Sauls company (Slashtastic Guitars) $18,500 for placing a small Fretlite logo on the back of each guitar made. What rate of return will Slashtastic earn on the new model?

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Creating Financial Value A Guide For Senior Executives With No Finance Background

Authors: Malcolm Allitt

1st Edition

1472922719, 978-1472922717

More Books

Students also viewed these Finance questions

Question

Describe the new structures for the HRM function. page 676

Answered: 1 week ago