Novell Electronics Recently Bought a Patent That Will Allow It

question 88

Short Answer

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.

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Definitions:

Account

A record within an accounting system that tracks the financial transactions for a specific asset, liability, equity, revenue, or expense.

Activity Bases

Factors or units of measure that are used to allocate costs to cost objects, often related to production or sales volume.

Quality Inspections

The systematic examination of goods or services to ensure they meet specified standards of quality and performance.

Machine Setups

This term refers to the preparations and adjustments made to machines before production runs, affecting manufacturing efficiency and costs.