[Stasis5001]

It may be "free money" as you frame it. But a cash stream that provides n dollars per year forever can be valued in today's dollars, assuming a discount rate of d, at n / (1-d). So it's reasonable to prefer cash now to revenue forever, at that exchange rate, depending on your corporate interests.

https://www.investopedia.com/terms/p/present-value-annuity.a...

[Denvercoder9]

You have the right idea, but you got the formula wrong. That's evidenced in the source you link, but you can also reason it from first principles: a higher discount rate should make the cash stream less valuable, not more. The correct formula is n / d.

[Stasis5001]

Oops, that's what I get for mathing before coffee-- mixed up the formula for \sum (1+r)^n vs. \sum r^n

[rf15]

This strikes me as a shortsighted, risky, and frankly unsustainable attitude for a company. It's no surprise they're struggling.

[captaincrisp]

The discount rate is doing a lot of work here. There is a discount rate such that we're not talking about shortsightedness. Getting it right is difficult. But as an example, how much would you buy an investment that pays a hundred dollars, guaranteed, next year for? Trivially, the discount rate includes at least the expected amount of inflation; it's not worth a dollar.

For assets line like IP you have to factor in how risky the returns are, how much investment you'd have to make to see them (e.g. making a movie), and overall strategy (do we want to be in that line of business).

All this to say - if you have IP that pays 10 million a year, you can value future returns on that IP in today's dollars. If someone offers you more than that to buy it, you should take the deal; you come out ahead.