Question

A manufacturer offers an inventor thechoice of two contracts for theexclusive right to manufacture andmarket the inventor's patented design.Plan 1 calls for an immediate singlepayment of $57,162. Plan 2 calls for anannual payment of $1,709 plus aroyalty of $4.66 for each unit sold. Theremaining life of the patent is 10 years.MARR is 10% per year. What must be the uniform annual sales to make Plan 1 and Plan 2 equally attractive?

Fig: 1

Fig: 2