Widgetech anticipates that 25 percent of its sales will be made in Europe. In year 1, Widgetech incurs $10 million developing its algorithm and $4 million marketing the algorithm in the United States. Widgetech's French subsidiary incurs $2 million marketing the algorithm in Europe.

What is the net payment owed under the cost sharing arrangement for year 1?

The French subsidiary owes Widgetech $3 million.

The French subsidiary owes Widgetech $2.5 million.

The French subsidiary owes Widgetech $3.6 million.

The French subsidiary owes Widgetech $2 million.

The French subsidiary owes Widgetech $2.4 million.

None of the above.

 

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