Homework answers / question archive / You work for a pharmaceutical company that has developed a new drug

You work for a pharmaceutical company that has developed a new drug

Finance

Share With

You work for a pharmaceutical company that has developed a new drug. The patent on the drug will last for 17 years. You expect that the drug will produce cash flows of $10 million in its first year and that this amount will grow at a rate of 4 per year for the following 16 years. Once the patent expires, other pharmaceutical companies wil be able to produce generic equivalents of your drug and competition will drive any future profits to zero. If the interest rate is 12% per year, then the present value of producing this drug is closest to #5170 milion 0.590 million S105 million d. None of the answers are correct 571 million