Question

In: Finance

You work for a pharmaceutical company that has developed a new drug. The patent on the...

You work for a pharmaceutical company that has developed a new drug. The patent on the drug will last 17 years. You expect that the​ drug's profits will be $2 million in its first year and that this amount will grow at a rate of 6% per year for the next 17 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 9% per​ year?

Solutions

Expert Solution

Present value can be calculated using following formula= cash flows/(discount rate -growth rate)/(1-(1.06/1.09)^17)

=( 20,00,000/(3%))*.377

= 2,51,84,829.21

jeff jeffy answered 2 years ago
Next > < Previous

Related Solutions

You work for a pharmaceutical company that has developed a new drug. The patent on the...
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's profits will be 4 million in its first year and that this amount will grow at a rate of 6% per year for the next 16 years. Once the patent expires, other pharmaceutical companies will be able to produce the same drug and competition will likely drive profits to zero. I f the...
You work for a pharmaceutical company that has developed a new drug. The patent on the...
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's profits will be 4 million in its first year and that this amount will grow at a rate of 6% per year for the next 16 years. Once the patent expires, other pharmaceutical companies will be able to produce the same drug and competition will likely drive profits to zero. I f the...
You work for a pharmaceutical company that has developed a new drug. The patent on the...
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's profits will be 4 million in its first year and that this amount will grow at a rate of 6% per year for the next 16 years. Once the patent expires, other pharmaceutical companies will be able to produce the same drug and competition will likely drive profits to zero. I f the...
You work for a pharmaceutical company that has developed a new drug. The patent on the...
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's profits will be 4 million in its first year and that this amount will grow at a rate of 6% per year for the next 16 years. Once the patent expires, other pharmaceutical companies will be able to produce the same drug and competition will likely drive profits to zero. I f the...
You work for a pharmaceutical company that has developed a new drug. The patent on the...
You work for a pharmaceutical company that has developed a new drug. The patent on the drug will last 17 years. You expect that the​ drug's profits will be $ 5 million in its first year and that this amount will grow at a rate of 6 % per year for the next 17 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...
You work for a pharmaceutical company that has developed a new drug. The patent on the...
You work for a pharmaceutical company that has developed a new drug. The patent on the drug will last 17 years. You expect that the drug's profits will be $1 million in its first year and that this amount will grow at a rate of 2% per year for the next 17 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...
You work for a pharmaceutical company that has developed a new drug. The patent on the...
You work for a pharmaceutical company that has developed a new drug. The patent on the drug will last 17 years. You expect that the​ drug's profits will be $ 5 million in its first year and that this amount will grow at a rate of 6 % per year for the next 17 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...
You work for a pharmaceutical company that has developed a new drug. The patent on the...
You work for a pharmaceutical company that has developed a new drug. The patent on the drug will last 17 years. You expect that the drug’s profits will be $2 million in its first year and that this amount will grow at a rate of 5% per year for the next 17 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...
You work for a pharmaceutical company that has developed a new drug. The patent on the...
You work for a pharmaceutical company that has developed a new drug. The patent on the drug will last 17 years. You expect that the​ drug's profits will be $ 3 million in its first year and that this amount will grow at a rate of 6 %6% per year for the next 17 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...
You work for a pharmaceutical company that has developed a new drug. The patent on the...
You work for a pharmaceutical company that has developed a new drug. The patent on the drug will last 17 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 2 % per year for the next 17 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...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT