Estimate capitalized value of research at leon technology

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Problem: Leon Technology is a firm that specializes in advanced telecommunication software and has been in existence for 4 years. For the current year, the firm reported $ 5 million in after-tax operating income and a book value of equity of $ 25 million. However, the operating income was computed after an R&D expense of $ 5 million. You believe that it will take approximately 5 years for R&D to commercially pay off in this business and have collected the R&D expenses for the 3 prior years the firm has been in existence:

Year -3 R&D expense $4 million

Year -2 R&D expense $3 million

Year -1 R&D expense $2 million

Estimate the capitalized value of research at Leon Technology

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Reference no: EM132441052

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