In: Operations Management
A side-venture 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 $150,000 and an additional expenditure of $150,000 at the end of each of the next 2 years. When the patent is approved in Year 4, 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 10 years. At that time the product that uses the technology will be replaced by a new model. What is the rate of return on the Jane’s advanced technology?
Please include calculations and diagrams