Dupont is considering licensing a low liquid

Chapter 18, Problem 18.40

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Dupont is considering licensing a low liquid discharge(LLD) water treatment system from a small company that developed the process and owns thelicense. Dupont can purchase a 1-year option for$100,000 that will provide time to pilot test theLLD process or Dupont can acquire the licensenow at a cost of $1.8 million plus 25% of sales paidannually to the license owner. If they wait 1 year,the cost will increase to $1.9 million plus 30% ofsales paid annually. If sales are estimated to be$1,000,000 per year over the 5-year license period,should Dupont purchase the license now or purchasethe option now and possibly license it afterthe 1-year test period? Assume the MARR is 15%per year

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