Mylan Pharm is investing in a new cancer treatment gene therapy. They have projected the cost of final clinical trials to be $90,000,000 (now) and for those to take 4 years to complete. They then have to get FDA approval, which will take an additional 2 years. The regulatory departmen has given the projections below. If your company goal is a MARR of 6%, a) What is the expected NPV b) Should you recommend this project? 30% chance of failure – No Revenue 50% chance of approval by FDA, 6 years from now, Revenue $20,000,000/ year for years 6-15 20% chance wider approval by FDA, 6 years from now, Revenue $55,000,000/year for years 6-15
Mylan Pharm is investing in a new cancer treatment gene therapy. They have projected the cost of final clinical trials to be $90,000,000 (now) and for those to take 4 years to complete. They then have to get FDA approval, which will take an additional 2 years. The regulatory departmen has given the projections below. If your company goal is a MARR of 6%, a) What is the expected NPV b) Should you recommend this project? 30% chance of failure – No Revenue 50% chance of approval by FDA, 6 years from now, Revenue $20,000,000/ year for years 6-15 20% chance wider approval by FDA, 6 years from now, Revenue $55,000,000/year for years 6-15
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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Question
a) -$25,391,153, No
b) $23,879,899, Yes
c) $24,043,600, Yes
d) $25,497,589, yes
Transcribed Image Text:Mylan Pharm is investing in a new cancer treatment gene therapy. They have projected the cost of final clinical trials to be $90,000,000 (now)
and for those to take 4 years to complete. They then have to get FDA approval, which will take an additional 2 years. The regulatory department
has given the projections below. If your company goal is a MARR of 6%,
a) What is the expected NPV
b) Should you recommend this project?
30% chance of failure – No Revenue
50% chance of approval by FDA, 6 years from now, Revenue $20,000,000/ year for years 6-15
20% chance wider approval by FDA, 6 years from now, Revenue $55,000,000/year for years 6-15
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