Approximately 14 million Americans are addicted to drugs and alcohol. The federal government estimates that these addicts-cost the U.S. economy $300 billion in medical expenses and lost productivity. Despite the enormous potential market, many biotech companie have shied away from funding research and development (R&D) initiatives to find a cure for drug and alcohol addiction. Your firm - Drug Abuse Sciences (DAS) - is a notable exception. It has spent $200 million to date working on a cure, but is now at a crossroads. can either abandon its program or invest another $60 million today. Unfortunately, the firm's opportunity cost of funds is 5 percent an it will take another five years before final approval from the Federal Drug Administration is achieved and the product is actually sold. Expected (year-end) profits from selling the drug are presented in the accompanying table. Year 1 $0 Year 2 $0 Year 3 $0 Year 4 $0 Year 5 $12,300,000 Year 6 $14,100,000 Year 7 $16,500,000 Year 8 $18,300,000 Year 9 $21,300,000 What is the net present value of the project? rounded to the nearest whole number. Do not round intermediate calculations.

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Approximately 14 million Americans are addicted to drugs and alcohol. The federal government estimates that these addicts-cost the
U.S. economy $300 billion in medical expenses and lost productivity. Despite the enormous potential market, many biotech companie
have shied away from funding research and development (R&D) initiatives to find a cure for drug and alcohol addiction. Your firm -
Drug Abuse Sciences (DAS) - is a notable exception. It has spent $200 million to date working on a cure, but is now at a crossroads.
can either abandon its program or invest another $60 million today. Unfortunately, the firm's opportunity cost of funds is 5 percent an
it will take another five years before final approval from the Federal Drug Administration is achieved and the product is actually sold.
Expected (year-end) profits from selling the drug are presented in the accompanying table.
Year 1
$0
Year 2
$0
Year 3
$0
Year 4
$0
Year 5
$12,300,000
Year 6
$14,100,000
Year 7
$16,500,000
Year 8
$18,300,000
Year 9
$21,300,000
What is the net present value of the project?
rounded to the nearest whole number. Do not round intermediate calculations.
Transcribed Image Text:Approximately 14 million Americans are addicted to drugs and alcohol. The federal government estimates that these addicts-cost the U.S. economy $300 billion in medical expenses and lost productivity. Despite the enormous potential market, many biotech companie have shied away from funding research and development (R&D) initiatives to find a cure for drug and alcohol addiction. Your firm - Drug Abuse Sciences (DAS) - is a notable exception. It has spent $200 million to date working on a cure, but is now at a crossroads. can either abandon its program or invest another $60 million today. Unfortunately, the firm's opportunity cost of funds is 5 percent an it will take another five years before final approval from the Federal Drug Administration is achieved and the product is actually sold. Expected (year-end) profits from selling the drug are presented in the accompanying table. Year 1 $0 Year 2 $0 Year 3 $0 Year 4 $0 Year 5 $12,300,000 Year 6 $14,100,000 Year 7 $16,500,000 Year 8 $18,300,000 Year 9 $21,300,000 What is the net present value of the project? rounded to the nearest whole number. Do not round intermediate calculations.
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