You work for a pharmaceutical company that has developed a new drug. The patent on the drug will last 15 years. You expect that the drug's profits will be $3 million inits first year and that this amount will grow at a rate of 2% per year for the next 15 years. Once the patent expires, other pharmaceutical companies will be able toproduce the same drug and competition will likely drive profits to zero. What is the present value of the new drug if the interest rate is 7% per year?The present value of the new drug is $million. (Round to three decimal places.)

The Present Value of a Growing Annuity refers to an annuity in which the amount increases after each…

Answered: You work for a pharmaceutical company…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Brewster's is considering a project with a life of 5 years, an initial cost of $150,000, and a discount rate of 10 percent. The firm expects to sell 2,400 units a year at a cash flow per unit of $25. The firm will have the option to abandon this project after three years at which time it could sell the project for $40,000. At what level of sales should the firm be willing to abandon this project at the end of the third year?Answer in Excel Please
You work for a pharmaceutical company that has developed a new drug. The patent on the drug will last 19 years. You expect that the drug's profits will be $4 million in its first year and that this amount will grow at a rate of 3 * 0/o per year for the next 19 years. Once the patent expires, other pharmaceutical companies will be able to produce the same drug and competition will likely drive profits to zero. What is the present value of the new drug if the interest rate is 12% per year? The present value of the new drug is $ (enter your response here) million.
Solve it correctly I upvote definitely. Please explain answer, preferable in EXCEL spredsheet way.
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