Equivalent to the non-uniform series of royalty payments

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Company A owns a patent with 15 years of remaining life. Company B is paying royalties to Company A for a license to the patent. It is estimated that royalty payments for the next 15 years will be $6,000 per year for the first 5 years, $8,000 per year for the next 4 years and $10,000 per year for the last 6 years. Company B offers to pre-pay the expected royalty payments for $70,000 now. If Company A considers 10% per year to be its minimum acceptable return on investment, should it accept the pre payment offer for $70,000 now or take the royalty payments year by year? What uniform annual payments for the next 15 years are equivalent to the non-uniform series of royalty payments?

Reference no: EM13998377

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