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?

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 $27,000. Plan B calls for an annual payment of $900 plus a royalty of $0.48 per unit sold. The remaining life of the patent is 10 years. Nadine uses a MARR of 11 %/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?

Expert Solution

The image below contains the formula behind the cells:

This will finally look like this :

Now the final step is to run the goal seek function, set pw of plan b to 27000(pw of A) by changing cell of units sold

now click OK and cell B12 is your answer (the number of units to be sold)

Please do not forget to like the solution if you found it helpful. For further query/doubts related to this solution, please drop a comment in the section below. I will get back you ASAP.

Rahul Sunny answered 2 years ago

5. Compare Present worth analysis, future worth analysis, annual worth analysis and benefit cost ratio analysis...

5. Compare Present worth analysis, future worth analysis, annual worth analysis and benefit cost ratio analysis of project evaluation.

Question 11 pts The interest rate at which the present worth and the equivalent uniform annual...

Question 11 pts The interest rate at which the present worth and the equivalent uniform annual worth are equal to 0 is called the internal rate of return. True False Question 21 pts To determine the internal rate of return, you can calculate net present worth at varying interests and select the interest rate where NPW = 0. True False Question 31 pts If the internal rate of return of a project is less than your MARR, then the project...

At what annual number of unit sales would Patterson Products Inc. be indifferent between the two upgrade options?

Patterson Products Inc. is considering an upgrade to its manufacturing equipment. The two upgrade options under consideration are shown below. Option 1 Option 2 Direct materials cost per unit $18 $15 Direct labour cost per unit $34 $27 Variable overhead per unit $26 $32 Fixed manufacturing costs $2,000,000 $3,000,000 The selling price of the company's product is $120 per unit with variable selling costs of 5% of sales. Fixed selling and administrative costs are $3,300,000 per year....

What is the present worth difference between an investment of $75,000 per year for 35 years...

What is the present worth difference between an investment of $75,000 per year for 35 years and an investment of $75,000 per year forever at an interest rate of 9% per year?

What is the difference between volume-based cost drivers and activity-based cost drivers? Give an example of...

What is the difference between volume-based cost drivers and activity-based cost drivers? Give an example of each to illustrate. Could you please explain the answer in detail? I know that this question is on Chegg already, but I still need a more in-depth help. Thanks!

9. Please rework the prior problem to determine what annual sales volume is needed to generate...

9. Please rework the prior problem to determine what annual sales volume is needed to generate a net present value of $0? To do this you will need to review the problem in the book and its excel answer. I will repeat the instructions here. You will need to calculate the net present value in the traditional way. You must make sure that the second year sales references the first year ( plus “first year” in the formula). You will...

Tell what you know about the difference between volume-based (traditional) costing and activity-based (ABC) costing

what successful marketing strategies a business must use for targeting new customers, improve its sales volume?...

what successful marketing strategies a business must use for targeting new customers, improve its sales volume? and what's each action step and evaluation method? -I want 4 marketing strategies

If the after tax interest is 10%, what is the after tax present worth of machinery that has a first cost of $66,000 and annual savings of $7,700?

If the after tax interest is 10%, what is the after tax present worth of machinery that has a first cost of $66,000 and annual savings of $7,700? The machinery is sold for $1100 salvage value at the end of a seven year life. The corporate tax rate is 59%.

What does regression analysis test? A) Relationship between variables B) Prediction of one variable based on...

What does regression analysis test? A) Relationship between variables B) Prediction of one variable based on another variable C) Differences between variables D) Slope of the regression line

Question