Pharmaceutical company that has developed new drug

Assignment Help Financial Management

Reference no: EM131014116

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 $5 million in its first year and that this amount will grow at a rate of 2% per year for the next 17 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 9% per year?

Reference no: EM131014116

Questions Cloud

What is highest effective annual interest rate attainable : What is the highest effective annual interest rate attainable with a 12 percent nominal interest rate? Please show your work. If you solve this using a financial calculator, please show the inputs.

Considering an investment in a new distribution center : In the spring of 2015, Jemison Electric was considering an investment in a new distribution center. Jemison's CFO anticipates additional earnings before interest and taxes (EBIT) of $100,000 for the first year of operation of the center, and, over th..

Pharmaceutical company that has developed new drug : You work for a pharmaceutical company that has developed a new drug. the patent of the drug will last 17 years. You expect that the drugs profits will $5 million dollars in its first year and that this amount will grow at a rate of 2% per year for th..

What is the npv of the investment : Dickinson Brothers, Inc., is considering investing in a machine to produce computer keyboards. The price of the machine will be $982,000, and its economic life is five years. The machine will be fully depreciated by the straight-line method. What is ..

Pharmaceutical company that has developed new drug : 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 $5 million in its first year and that this amount will grow at a rate of 2% per year for the ne..

What are projects payback and discounted payback periods : You are considering a project with an initial cash outlay of $80,000 and expected cash flows of $20,000 at the end of each year for six years. The discount rate for this project is 10 percent. What are the project’s payback and discounted payback per..

Money by taking advantage of the efficient market hypothesis : Dimensional Fund Advisors is an investment consulting firm that is a believer in market efficiency. How does this firm make money by taking advantage of the Efficient Market Hypothesis?

What is the next dividend you would receive : The common stock of Old Betsy Flags is constantly selling for $28 per share. The company has been growing at a constant annual rate of 4%, and this growth is expected to continue for an infinite period. The required rate on the stock is 11%. If you b..

Growth is expected to continue for an infinite period : The common stock of Old Betsy Flags is constantly selling for $28 per share. The company has been growing at a constant annual rate of 4%, and this growth is expected to continue for an infinite period. The required rate on the stock is 11%. If you b..

User Account

All Pages