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Compute the transaction price of the arrangement

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Question - Roche Pharmaceutical entered into a licensing agreement with Zenith LAb for a new drug under development. Roche will receive $6, 750,000 if the new drug receives FDA approval. Based on prior approval, Roche determines that it is 85% likely that the drug will gain approval. The transaction price of the arrangement should be

a. $6,750,000

b. $5,737,500

c. $1,012,500

d. $0 until approval is received.

Reference no: EM132189556

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