Calculate the internal rate of return on the investment

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Jane is an inventor, working for the ACME Gadget Company in research and development. She recently proposed the development of an advanced technology, but it was deemed too risky for R&D at ACME. However, ACME has agreed that if Jane successfully develops the technology on her own, ACME will acquire a license to use the technology for a period of 10 years. To develop the technology will require an initial expenditure of $250,000 now and an additional expenditure of $150,000 at the beginning of each of the next 2 years. When the patent is approved at the beginning of Year 4 (end of year 3), it is expected to be licensed to the ACME Gadget Company for an upfront fee of 100,000 plus an additional fee of $90,000/year for the next 9 years. At that time the product that uses the technology will be replaced by a new model.

Determine the net present value if the discount rate is 1) i - 5% and 2) i - 10% . Calculate the internal rate of return on the investment.

Reference no: EM132622297

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