What is net present value of the project

Assignment Help Business Economics

Reference no: EM131194496

(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 companies 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 $235 million to date working on a cure, but is now at a crossroads. It can either abandon its program or invest another $50 million today. Unfortunately, the firm’s opportunity cost of funds is 5 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.

Year 1 $0

Year 2 $0

Year 3 $0

Year 4 $0

Year 5 $14,300,000

Year 6 $16,500,000

Year 7 $19,200,000

Year 8 $21,900,000

Year 9 $24,800,000

What is the net present value of the project? Instruction: Round your answer to the nearest penny (2 decimal places). Use a negative sign (-) where appropriate.

Reference no: EM131194496

Questions Cloud

Discuss and share the trade policies : Discuss and share the trade policies that best serve your self-interests, and those that best serve the social interest. Please include the concepts and arguments pertaining to free trade versus trade protections as explained in the textbook when sha..

Major innovations or new technology employed : Choosing Carnegie, Ford, or Rockefeller, or a more recent major entrepreneur, write a brief essay of 2 pages highlighting the major innovations or new technology employed that created substantial wealth for their companies. Don’t worry about repeatin..

What fiscal policy would you consider appropriate : You are a macro policy maker for the CEA (Council of Economic Advisors). You have experience with the Congress (Fiscal Policy). What is the major economic problem for the United States? What Fiscal Policy would you consider appropriate? Why?

What skills would employees need to acquire : What are the greatest challenges of using telephones for customer service in small businesses? What procedures could you put in place to improve the level of service? What skills would employees need to acquire? How do personal problems or priorities..

What is net present value of the project : (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. What is the net present value of the projec..

Unlimited amount of muffins at no additional cost : A muffin stand lets consumers choose among a menu of three pricing options: (a) a monthly subscription fee of $200 and a price per muffin of $4; (b) a monthly subscription fee of $300 and a price per muffin of $3; or (c) a monthly subscription fee of..

The profit maximizing prices and profits if the firm bundles : A restaurant has three types of customers. A third of its customers, Type A, are willing to spend $5 on an appetizer but only $2 on a dessert. Another third, Type B, are willing to spend $3.50 on an appetizer and $3.50 on a dessert. Calculate the pro..

Characteristic of monopolists demand curve : The monopolist's demand curve: Under which of the following situations would a monopolist increase profits by lowering price (and increasing output): Which of the following is characteristic of a monopolist's demand curve?

Characteristic of differentiated oligopolistic market : Which is a likely characteristic of a differentiated oligopolistic market?

User Account

All Pages