You work for a pharmaceutical company that has developed a new drug. The patent on the drug will last 19 years. You expect that the drug's profits will be $3 million in its first year and that this amount will grow at a rate of 3% per year for the next 19 years. Once the patent expires, other pharmaceutical companies will be able to produce the same drug and competition will likely drive profits to zero. What is the present value of the new drug if the interest rate is 12% per year? The present value of the new drug is $ million. (Round to three decimal places.) CELEB
You work for a pharmaceutical company that has developed a new drug. The patent on the drug will last 19 years. You expect that the drug's profits will be $3 million in its first year and that this amount will grow at a rate of 3% per year for the next 19 years. Once the patent expires, other pharmaceutical companies will be able to produce the same drug and competition will likely drive profits to zero. What is the present value of the new drug if the interest rate is 12% per year? The present value of the new drug is $ million. (Round to three decimal places.) CELEB
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
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You work for a pharmaceutical company that has developed a new drug. The patent on the drug will last 19 years. You expect that the drug's profits will be $3 million in its first year and that this
amount will grow at a rate of 3% per year for the next 19 years. Once the patent expires, other pharmaceutical companies will be able to produce the same drug and competition will likely drive
profits to zero. What is the present value of the new drug if the interest rate is 12% per year?
The present value of the new drug is $
million. (Round to three decimal places.)
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