March 28, 2017

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1.Following is the projected net income stream associated with the use of
Zartek technology. (Note: this net income stream does not take into account that Zartek’s owners invested $2,000 to develop Zartek in Year 0.) Globus Maximus Enterprises would like to buy the Zartek patent.

How could the net income data be used to help establish the dollar value of the technology (assume a prevailing interest rate for the five year time period as 7% per year)?

Show your reasoning in establishing a sales price. Be realistic in your analysis (i.e., are there other factors that should be taken into account than what is covered here?).

Net income:

Year 1 Year 2 Year 3 Year 4 Year 5
$1,000 $1,300 $1,200 $1,300 $1,200

Initial investment in Zartek technology: $2,000

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