Asked by Esmer Çetin on May 18, 2024
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Novell Electronics recently bought a patent that will allow it to bring a new product to market in 2½ years. Sales forecasts indicate that the product will increase the quarterly profits by $28,000. If the patent cost $150,000, how long after the date of the patent purchase will it take for the additional profits to repay the original investment along with a return on investment of 15% compounded quarterly? Assume that the additional profits are received at the end of each quarter.
Compounded Quarterly
An interest calculation method where the accrued interest is added to the principal four times a year, increasing the amount on which future interest is computed.
Quarterly Profits
The net earnings or losses of a company calculated every three months within a fiscal year.
Patent
A legal authorization granted to an inventor to exclusively manufacture, use, or sell an invention for a certain number of years.
- Determine the time required for a business investment to repay its initial cost including a desired return.
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Learning Objectives
- Determine the time required for a business investment to repay its initial cost including a desired return.