A drug company is deciding how much to invest in Research and Development into finding a cure for the common cold. The table below shows the company’s demand for financial capital for R&D of this cold drug, based on its expected rates of return from selling the cure. Every investment has an additional 4% social return: that is, an investment that pays at least a 5% return to the drug company will create at least a 9% return for society as a whole. Estimated Rate of Return_____________________ Value of R&D Projects That Provide at Least This High a Private Rate of Return to the Drug Company (measured in millions of dollars) 10% $220 9% $228 8% $238 7% $250 6% $264 5% $280 4% $298 If the opportunity cost of financial capital for the drug company is 7%, the drug company will invest in R&D if it receives both the private and the social benefits of this investment. Question 3 options: $308 $264 $250 $228
A drug company is deciding how much to invest in Research and Development into finding a cure for the common cold. The table below shows the company’s demand for financial capital for R&D of this cold drug, based on its expected
Estimated Rate of Return_____________________ Value of R&D Projects That Provide at Least This High a Private Rate of Return to the Drug Company (measured in millions of dollars)
10% $220
9% $228
8% $238
7% $250
6% $264
5% $280
4% $298
If the
Question 3 options:
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$308 |
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$264 |
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$250 |
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$228 |
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