You work for a pharmaceutical company that has developed a new drug. The patent on the drug will last 17 years. You expect that the drug's profits will be $3 mition in its firstyear and that this amount will grow at a rate of 4% per year for the next 17 years. Once the patent expires, other pharmaceutical companies will be able to produce the same drugand competition will likely drive profits to zero. What is the present value of the new drug of the interest rate is 11% per year?The present value of the new drug is million. (Round to three decimal places.)

Data given: Profit in 1st year=$3 million Growth per year for the next 17 years=4% n=17 years…

Answered: You work for a pharmaceutical company…

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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