It's It has entered into a license agreement with Dairy Delight company. The license fee is $150,000 The royalty fees are 5% of revenues Dairy Delight's five year revenue forecast are: Year 1 $200,000 Year 2 $300,000 Year 3 $400,000 Year 4 $500,000 Year 5 $600,000 For a total 5 year revenue of $2M The gross margin of Dairy Delight is 35% Their marketing costs are 5% of sa

It's It has entered into a license agreement with Dairy Delight company. The license fee is $150,000 The royalty fees are 5% of revenues Dairy Delight's five year revenue forecast are: Year 1 $200,000 Year 2 $300,000 Year 3 $400,000 Year 4 $500,000 Year 5 $600,000 For a total 5 year revenue of $2M The gross margin of Dairy Delight is 35% Their marketing costs are 5% of sa

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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Question

It's It has entered into a license agreement with Dairy Delight company.
The license fee is $150,000
The royalty fees are 5% of revenues
Dairy Delight's five year revenue forecast are:
Year 1 $200,000
Year 2 $300,000
Year 3 $400,000
Year 4 $500,000
Year 5 $600,000
For a total 5 year revenue of $2M
The gross margin of Dairy Delight is 35%
Their marketing costs are 5% of sales per year.
They sell the product for 85 cents.
What will be It's It's revenue from this licensing arrangement over the 5 years?

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