Amna, an inventor, has developed an exciting new process for producing an infinite supply of energy from salt water. Amna believes that she can sell her invention to a major oil company. Amna is asking for a Royalty of $6.5 Million dollars, payable at the end of year one and then increasing at the rate of 5.5% per year forever. If an appropriate discount rate is 16%, how much should Amna accept if the company wants to pay her a lump sum amount today?a. $33.3 Millionb. There is no correct answer given.c. $60 Milliond. $40 Million
Amna, an inventor, has developed an exciting new process for producing an infinite supply of energy from salt water. Amna believes that she can sell her invention to a major oil company. Amna is asking for a Royalty of $6.5 Million dollars, payable at the end of year one and then increasing at the rate of 5.5% per year forever. If an appropriate discount rate is 16%, how much should Amna accept if the company wants to pay her a lump sum amount today?a. $33.3 Millionb. There is no correct answer given.c. $60 Milliond. $40 Million
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Amna, an inventor, has developed an exciting new process for producing an infinite supply of energy from salt water. Amna believes that she can sell her invention to a major oil company. Amna is asking for a Royalty of $6.5 Million dollars, payable at the end of year one and then increasing at the rate of 5.5% per year forever. If an appropriate discount rate is 16%, how much should Amna accept if the company wants to pay her a lump sum amount today?a. $33.3 Millionb. There is no correct answer given.c. $60 Milliond. $40 Million
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