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Accounting: selling a patent.?
if you were selling a patent and got offered 1) 1,000,000 today or 2) 100,000 right now and another 100,000 per year for the next 20 years (total of 21 payments) current market rate is 10%. Which one would you take. This problem is using future and present values.
thanks
1 Answer
- Nuff SedLv 79 years ago
Depends upon your present need for the $1M and future needs for the higher ROI. You'd invest $1M today and have $7.4M at the end of 21 years (compound interest). If you were to take $100,000 per year, invest at 10 percent and add another $100,000 per year, you'd eventually have $7.7M in 21 years, although it would take slightly longer to hit $2M.
As a practical matter, however, you should take the $1M now, before the patent loses its value or becomes invalid for any reason. Would you want to be owed $4M by someone who no longer likes you?
Source(s): http://www.moneychimp.com/calculator/compound_inte... interest calculator
