Problem 01-15 (algo) Approximately 14 million Americans are addicted to drugs and alcohol. The federal government estimates that these addicts cost t U.S. economy $300 billion in medical expenses and lost productivity. Despite the enormous potential market, many biotech comp. 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 $165 million to date working on a cure, but is now at a crossroad can either abandon its program or invest another $45 million today. Unfortunately, the firm's opportunity cost of funds is 7 percent it will take another five years before final approval from the Federal Drug Administration is achieved and the product is actually so Expected (year-end) profits from selling the drug are presented in the accompanying table. What is the net present value of the project? nstructions: Enter your response rounded to the nearest penny (two decimal places). Use a negative sign (-) where appro
Problem 01-15 (algo) Approximately 14 million Americans are addicted to drugs and alcohol. The federal government estimates that these addicts cost t U.S. economy $300 billion in medical expenses and lost productivity. Despite the enormous potential market, many biotech comp. 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 $165 million to date working on a cure, but is now at a crossroad can either abandon its program or invest another $45 million today. Unfortunately, the firm's opportunity cost of funds is 7 percent it will take another five years before final approval from the Federal Drug Administration is achieved and the product is actually so Expected (year-end) profits from selling the drug are presented in the accompanying table. What is the net present value of the project? nstructions: Enter your response rounded to the nearest penny (two decimal places). Use a negative sign (-) where appro
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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Transcribed Image Text:Problem 01-15 (algo)
$
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 $165 million to date working on a cure, but is now at a crossroads. It
can either abandon its program or invest another $45 million today. Unfortunately, the firm's opportunity cost of funds is 7 percent and
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.
What is the net present value of the project?
Instructions: Enter your response rounded to the nearest penny (two decimal places). Use a negative sign (-) where appropriate.
Should DAS continue with its plan to bring the drug to market, or should it abandon the project?
(Click to select) ✓
Year 1
$0
Year 2
$0
Year 3
$0
Year 4
$0
Year 5
$12,300,000
< Prev
Year 6
$14,500,000
9 of 15
‒‒‒
B
Next
Year 7
$17,100,000
Check my wor
Year 8
$18,500,000
Year 9
$20,300,000
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