Hansen Pharmaceuticals is considering development of a potential new drug. Testing will cost $31 million today. If the tests are successful, the company will invest $110 million into production and final development starting one year from now. Following that investment, the drug should produce cash flows of $61 million per year for the next 9 years. What is the NPV of this project, assuming the appropriate discount rate is 20% and the initial tests have a 40% chance of success? Don't round steps. 2 decimal answer. NPV = $ Suppose Hansen Pharmaceuticals has the option to sell their research for $1 million in the event of an unsuccessful test. What is the value of this option to abandon? Don't round steps. 2 decimal answer. Option to Abandon = $
Hansen Pharmaceuticals is considering development of a potential new drug. Testing will cost $31 million today. If the tests are successful, the company will invest $110 million into production and final development starting one year from now. Following that investment, the drug should produce cash flows of $61 million per year for the next 9 years.
What is the NPV of this project, assuming the appropriate discount rate is 20% and the initial tests have a 40% chance of success? Don't round steps. 2 decimal answer.
NPV = $
Suppose Hansen Pharmaceuticals has the option to sell their research for $1 million in the event of an unsuccessful test. What is the value of this option to abandon? Don't round steps. 2 decimal answer.
Option to Abandon = $
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