Your R&D group has developed and tested a computer software package that helps engineers control

the proper chemical mix for various process$-$manufacturing industries. If you decide to market the

software, your first$-$year operating net cash flow is estimated to be $$800,000.$ Because of market

competition, product life will be about four years, and the product's market share will decrease by

$25\%$ each year over the previous year's share.

$($A$)$To protect the erosion of the market share $($to maintain $$800,000$ cash flow per year prior to

update costs$),$ you need to upgrade the software every year at the expense of $$50,000.$ Is it worth

upgrading the software? Your interest rate is $15\%.$

$($B$)$ You are approached by a big software house which wants to purchase the right to produce and

distribute the software. For what minimum price would you be willing to sell the software?