Gene Research, Inc., just finished a 4-year program of R&D and clinical trial. It ex- pects a quick approval from the Food and Drug Administration. If Gene markets the product its own, the company will require $30 million immediately (n = 0) to build a new manufacturing facility, and it is expected to have a 10-year product life. The R&D expenditure in the previous years and the anticipated revenues that the company can generate over the next 10 years are summarized as follows: Cash Flow (Unit: $ million) Period (n) -4 -$10 -3 -10 -2 -10 -1 -10 -10 – 30 1–10 100 Merck, a large drug company is interested, in purchasing the R&D project and the right to commercialize the product from Gene Research, Inc.; it wants to do so immediately (n = 0). What would be a starting negotiating price for the project from Merck? Assume that Gene's MARR = 20%.
Gene Research, Inc., just finished a 4-year program of R&D and clinical trial. It ex- pects a quick approval from the Food and Drug Administration. If Gene markets the product its own, the company will require $30 million immediately (n = 0) to build a new manufacturing facility, and it is expected to have a 10-year product life. The R&D expenditure in the previous years and the anticipated revenues that the company can generate over the next 10 years are summarized as follows: Cash Flow (Unit: $ million) Period (n) -4 -$10 -3 -10 -2 -10 -1 -10 -10 – 30 1–10 100 Merck, a large drug company is interested, in purchasing the R&D project and the right to commercialize the product from Gene Research, Inc.; it wants to do so immediately (n = 0). What would be a starting negotiating price for the project from Merck? Assume that Gene's MARR = 20%.
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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q5.20
Transcribed Image Text:5.20 Gene Research, Inc., just finished a 4-year program of R&D and clinical trial. It ex-
pects a quick approval from the Food and Drug Administration. If Gene markets
the product its own, the company will require $30 million immediately (n = 0) to
build a new manufacturing facility, and it is expected to have a 10-year product life.
The R&D expenditure in the previous years and the anticipated revenues that the
company can generate over the next 10 years are summarized as follows:
Cash Flow
Period (n)
(Unit: $ million)
-4
-$10
-3
-10
-2
-10
-1
-10
-10 – 30
1–10
100
Merck, a large drug company is interested, in purchasing the R&D project and the
right to commercialize the product from Gene Research, Inc.; it wants to do so
immediately (n = 0). What would be a starting negotiating price for the project
from Merck? Assume that Gene's MARR = 20%.
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