Crane Company acquired a patent on an oil extraction technique on January 1, 2020 for $8050000. It was expected to have a 10 year life and no residual value. Crane uses straight-line amortization for patents. On December 31, 2021, the future cash flows expected from the patent were $1065000 per year for the next eight years. The present value of these cash flows, discounted at Crane's market interest rate, is $4475000. At what amount should the patent be carried on the December 31, 2021 balance sheet? O $8050000. O $6440000. O $8520000. O $4475000.
Crane Company acquired a patent on an oil extraction technique on January 1, 2020 for $8050000. It was expected to have a 10 year life and no residual value. Crane uses straight-line amortization for patents. On December 31, 2021, the future cash flows expected from the patent were $1065000 per year for the next eight years. The present value of these cash flows, discounted at Crane's market interest rate, is $4475000. At what amount should the patent be carried on the December 31, 2021 balance sheet? O $8050000. O $6440000. O $8520000. O $4475000.
Chapter10: Capital Budgeting: Decision Criteria And Real Option
Section: Chapter Questions
Problem 2P
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![Crane Company acquired a patent on an oil extraction technique on January 1, 2020 for $805000O. It was expected to have a 10 year
life and no residual value. Crane uses straight-line amortization for patents. On December 31, 2021, the future cash flows expected
from the patent were $1065000 per year for the next eight years. The present value of these cash flows, discounted at Crane's market
interest rate, is $4475000. At what amount should the patent be carried on the December 31, 2021 balance sheet?
O $8050000.
O $6440000.
O $8520000.
O $4475000.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F0506d55b-bb84-43f9-9218-6fc41e3ed9b6%2F1cbdf9cf-2b49-4d48-8caf-e3e2a26faea9%2Fvy746ef_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Crane Company acquired a patent on an oil extraction technique on January 1, 2020 for $805000O. It was expected to have a 10 year
life and no residual value. Crane uses straight-line amortization for patents. On December 31, 2021, the future cash flows expected
from the patent were $1065000 per year for the next eight years. The present value of these cash flows, discounted at Crane's market
interest rate, is $4475000. At what amount should the patent be carried on the December 31, 2021 balance sheet?
O $8050000.
O $6440000.
O $8520000.
O $4475000.
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