Crane Company acquired a patent on an oil extraction technique on January 1, 2020 for $8050000. It was expected to have a 10 year life and no residual value. Crane uses straight-line amortization for patents. On December 31, 2021, the future cash flows expected from the patent were $1065000 per year for the next eight years. The present value of these cash flows, discounted at Crane's market interest rate, is $4475000. At what amount should the patent be carried on the December 31, 2021 balance sheet? O $8050000. O $6440000. O $8520000. O $4475000.

Crane Company acquired a patent on an oil extraction technique on January 1, 2020 for $8050000. It was expected to have a 10 year life and no residual value. Crane uses straight-line amortization for patents. On December 31, 2021, the future cash flows expected from the patent were $1065000 per year for the next eight years. The present value of these cash flows, discounted at Crane's market interest rate, is $4475000. At what amount should the patent be carried on the December 31, 2021 balance sheet? O $8050000. O $6440000. O $8520000. O $4475000.

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter10: Capital Budgeting: Decision Criteria And Real Option

Section: Chapter Questions

Problem 2P

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