Potential cash flow is estimated at net revenues

Assignment Help Financial Accounting

Reference no: EM13777773

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 VP’s 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: EM13777773

Questions Cloud

Mean for the future of generation : It has been asserted (both through popular perception and through data-driven research) that Generation Y is more self-centered, and some would say, narcissistic, than other generations who came before.

Identify the various cybercrimes : how to identify the various cybercrimes and what measures my business could take to ward them off before they happen. Identify the various cybercrimes that would apply in a business setting

Why does the federal government have an inspector general : Why does the Federal Government have an Inspector General? Why the differences. If agencies have an Inspector General, why does the General Accountability Office exists?

Successful advocacy programs for early cancer screening : Using the Walden Library and other credible websites, identify at least two successful advocacy programs for early cancer screening and evaluate the characteristics that made them effective based on the evidence presented in the article or website..

Potential cash flow is estimated at net revenues : 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..

Components of eklind adolescent egocentrism : Define both imaginary audience and personal fable which are the components of Eklind's adolescent egocentrism.

The key components of the agency and its overarching mission : Qualifications and skills of the employees, Services provided and The key components of the agency and its overarching mission

Acts of violence in british-occupied palestine : The state of Israel has been engaged with Islamic terrorists since its inception and recognition as a country. However, even prior to the establishment of Israel, Jewish and Arab fighters engaged in acts of violence in British-occupied Palestine.

Write a paper on social policies in international comparison : Write a paper about Social Policies in International Comparison.

User Account

All Pages