Which contract would the manufacturer prefer

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Reference no: EM132009749

Question: Nadine Chelesvig has patented her invention. She is offering a patent manufacturer two contracts for the exclusive right to manufacture and market her product. Plan A calls for an immediate single lump payment to her of $26,000. Plan B calls for an annual payment of $1,000 plus a royalty of $0.48 per unit sold. The remaining life of the patent is 10 years. Nadine uses a MARR of 14 %/year.

a. What must be the uniform annual sales volume of the product for Nadine to be indifferent between the contracts, based on a present worth analysis? Do all calculations to 5 decimal places and round final answer to a whole number. The tolerance is +/-10 b. If the sales volume is below the volume determined in (a), which contract would the manufacturer prefer?

Do all calculations to 5 decimal places and round final answer to a whole number. The tolerance is +/-10

b. If the sales volume is below the volume determined in (a), which contract would the manufacturer prefer?

Options for answers:

1) Plan A

2) Plan B

Reference no: EM132009749

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