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Nadine Chelesvig has patented her invention. She is offering a potential manufacturer two contracts for the exclusive right to manufacture and market her product. Plan A calls for an immediate single lump sum payment to her of $30,000. Plan B calls for an annual payment of $ 1,000 plus a royalty of $0.50 per unit sold. The remaining life of the patent is 10 years. Nadine uses a MARRof 10 percent/year. What must be the uniform annual sales volume of the product for Nadine to be indifferent between the contracts, based on a present worth analysis? If the sales volume is below the volume determined in (a), which contract would the manufacturer prefer?
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