Genesis Pharmaceutical has developed a new diabetes medication. It estimates that the sales volume during the first year will be 200,000 units. The sales volume is projected to grow by 20% each year. The price of each unit is $50 during the first year and will increase by 5% each year. The fixed manufacturing costs for the medication are $500,000 for every 100,000 units, and the variable costs are $25 per unit. The variable costs will increase by 10% each year due to increased material and labor costs. a. Develop a spreadsheet model to estimate the total profit Genesis Pharmaceutical makes on this medication over the next five years. Note: Round your answer to 2 decimal places. Total profit b-1. Convert the future profits into their net present value. If it costs Genesis Pharmaceutical $12,000,000 in R&D to develop the medication, What is the net present value (NPV) of the 3-year profit assuming a discount rate of 3%? Note: Round your answer to 2 decimal places. NPV of the total profit
Genesis Pharmaceutical has developed a new diabetes medication. It estimates that the sales volume during the first year will be 200,000 units. The sales volume is projected to grow by 20% each year. The price of each unit is $50 during the first year and will increase by 5% each year. The fixed manufacturing costs for the medication are $500,000 for every 100,000 units, and the variable costs are $25 per unit. The variable costs will increase by 10% each year due to increased material and labor costs. a. Develop a spreadsheet model to estimate the total profit Genesis Pharmaceutical makes on this medication over the next five years. Note: Round your answer to 2 decimal places. Total profit b-1. Convert the future profits into their net present value. If it costs Genesis Pharmaceutical $12,000,000 in R&D to develop the medication, What is the net present value (NPV) of the 3-year profit assuming a discount rate of 3%? Note: Round your answer to 2 decimal places. NPV of the total profit
Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Don R. Hansen, Maryanne M. Mowen
Chapter16: Cost-volume-profit Analysis
Section: Chapter Questions
Problem 10E: Schylar Pharmaceuticals, Inc., plans to sell 130,000 units of antibiotic at an average price of 22...
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![Genesis Pharmaceutical has developed a new diabetes medication. It estimates that the sales volume during the first year will be
200,000 units. The sales volume is projected to grow by 20% each year. The price of each unit is $50 during the first year and will
increase by 5% each year. The fixed manufacturing costs for the medication are $500,000 for every 100,000 units, and the variable
costs are $25 per unit. The variable costs will increase by 10% each year due to increased material and labor costs.
a. Develop a spreadsheet model to estimate the total profit Genesis Pharmaceutical makes on this medication over the next five years.
Note: Round your answer to 2 decimal places.
Total profit
b-1. Convert the future profits into their net present value. If it costs Genesis Pharmaceutical $12,000,000 in R&D to develop the
medication, What is the net present value (NPV) of the 3-year profit assuming a discount rate of 3%?
Note: Round your answer to 2 decimal places.
NPV of the total profit](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F7ddf9901-cb5d-4731-b007-4b85788bf647%2F52dbd7d2-d0ae-43e8-a884-07daefbdfb48%2Fy01fu77_processed.png&w=3840&q=75)
Transcribed Image Text:Genesis Pharmaceutical has developed a new diabetes medication. It estimates that the sales volume during the first year will be
200,000 units. The sales volume is projected to grow by 20% each year. The price of each unit is $50 during the first year and will
increase by 5% each year. The fixed manufacturing costs for the medication are $500,000 for every 100,000 units, and the variable
costs are $25 per unit. The variable costs will increase by 10% each year due to increased material and labor costs.
a. Develop a spreadsheet model to estimate the total profit Genesis Pharmaceutical makes on this medication over the next five years.
Note: Round your answer to 2 decimal places.
Total profit
b-1. Convert the future profits into their net present value. If it costs Genesis Pharmaceutical $12,000,000 in R&D to develop the
medication, What is the net present value (NPV) of the 3-year profit assuming a discount rate of 3%?
Note: Round your answer to 2 decimal places.
NPV of the total profit
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