Liberal in ignoring intellectual property claims

Assignment Help Financial Accounting

Reference no: EM13777035

Super Tennis Co is in the business of designing and manufacturing running shoes for long distance runners. They are considering a $500 million upgrade to their production line for the iPhone/iPad/ iWatch connected shoe that has Bluetooth connectivity. The potential cash flow is estimated at net revenues of $460 million per year for four years. Recently, they were advised of potential patent infringement and to eliminate this problem they are considering buying a license. YezzCo will sell a license that is good for four years of exclusive use of the patent and associated intellectual property. Super Tennis Co uses a corporate MARR of 14% and their risk-free alternatives are 6%. The VP of Engineering at Super Tennis Co estimates market volatility in demand is 40%. The VP of Marketing estimates market volatility in demand at 35%.

1. Since the VPs trust you, they asked you to figure out the most they should pay for a license from YezzCo.

2. Super Tennis Co is known to be liberal in ignoring intellectual property claims. Imagine they just go ahead with the project as stated above. (In other words, they decide not to pay for the license.) YezzCo aggressively protects their property and sues immediately. Sometime in year 3, (from the start of the effort) a court decision requires Super Tennis Co to reimburse YezzCo $375 million. They pay at the end of year 4. How does this strategy work for them? Are they better off licensing or being aggressive?

Reference no: EM13777035

Questions Cloud

Governmental and nonprofit accounting : Presented here is a partial list of accounts for the total governmental funds of the City of X. What worksheet adjustments would be required to convert this information to information that the city needs for preparing its government-wide financial st..

Explain the decision of the supreme court in this case : Summarize the salient points of the Supreme Court case Elk Grove Unified School District v. Newdow. Discuss the levels of the court through which the case evolved before it reached the Supreme Court. Explain the decision of the Supreme Court in this ..

What is the firms weighted average cost of capital : A firm's target capital structure consists of 40 percent debt, 5 percent preferred stock, and 55 percent common equity. The firm’s cost of debt is 10%, the cost of preferred stock is 11.26%, and the cost of equity is 14 %. What is the firm's weighted..

Who is to blame-the individual or society : This past weekend, he was arrested during a burglary when he entered a home where the home owner was present. His mother had to mortgage her home to bail him out of jail. While driving him home, she started to berate him, stating that he has ended..

Liberal in ignoring intellectual property claims : Super Tennis Co is in the business of designing and manufacturing running shoes for long distance runners. They are considering a $500 million upgrade to their production line for the iPhone/iPad/ iWatch connected shoe that has Bluetooth connectivity..

Asset cost basis-plumbing equipment : The company purchased the following items for use solely in the business during 2014: a new truck (weighing over 6,000 pounds) bought on June 21 that cost $21,250; a new computer system bought on August 17 costing $3,200; additional new office furnit..

Variables the researchers controlled-research hypothes : In this assignment, you will read an article about the Mozart effect and identify various parts of the research process. This exercise will help you learn how to read a research article and to understand the research process.

Write an essay about any classic things : Write an essay about any classic thing (examples: classic cars, classic music..etc).

The ethical use of power issues : Did the firing of John Lasseter indicate the existence of political behavior in the Disney organization?

User Account

All Pages