Terminate the program or move to the development phase

Assignment Help Business Economics

Reference no: EM13733500

A pharmaceutical company has already spent 1 million dollars in research for a new drug and now has to make a decision. The company can either terminate the research program or it can move to the development phase. If the company moves to the development phase, it has to invest another 1 million dollars today to start producing and selling the new drug. However, once the company begins producing and selling the new drug, it expects to make 150,000 dollars at the end of each year forever. If the opportunity cost of funds (interest rate) is 10% per year, should the company terminate the program or move to the development phase? Show Work

Reference no: EM13733500

Questions Cloud

Long-term implications of any decision : Compose an e-mail to the owners explaining the situation and your recommendation for action. Communicate the importance of the decision from a policy-setting perspective and long-term implications of any decision.

Describe product development and the product life cycle : New Product Development and the Product Life Cycle and Core Market Offerings and Defining the Product

Draw a supply and demand curve for the output : A paper mill has leaked a toxic substance (chlorine) into the ground. Fixing the leak was very expensive so the paper mill chose not to fix the leak. Once local residents and local government discovered that the toxic was contaminating local water su..

Project report on grand wines : you are required to present an initial project report on Grand Wines to the project sponsor that includes the following specific project outputs to show how you propose to implement this project:

Terminate the program or move to the development phase : A pharmaceutical company has already spent 1 million dollars in research for a new drug and now has to make a decision. The company can either terminate the research program or it can move to the development phase. If the company moves to the develop..

Prices under third-degree price discrimination : You are the manager of a monopoly that sells a product to two groups of consumers in different parts of the country. Group 1’s elasticity of demand is -6, while group 2’s is -3. Your marginal cost of producing the product is $70. Determine your optim..

Prepare a positioning statement : Prepare a positioning statement. Include a perceptual map that shows your company's position against its competitors. From this map, create a statement that depicts your position

Calculate elasticity of supply when increase in demand cause : Calculate the elasticity of supply when an increase in demand causes the equilibrium price and quantity to change from $2.00 and 500 to $2.80 and 1,000, respectively.

Characteristics of the perfect competition market structure : gricultural markets are often cited as exhibiting the characteristics of the perfect competition market structure. Does farming fit this model? Use the key word ECONOMIC NEWS in an Internet search engine (Google, Bing etc.) to locate online news sour..

User Account

All Pages