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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 $ 4 million in its first year and that this amount will grow at a rate of 3 % 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 12 % per? year?
The Present value of the new drugs is $____ Millions
The common stock of DUC has a beta of 1.65. The market rate of return is 13.2% and the risk-free rate is 4.8%. What is the cost of equity for the firm?
General Electric sold jet engines on credit to Air France and invoiced €10 million payable in six months. Currently, the six-month forward exchange rate is $1.25/€ and the foreign exchange advisor for General Electric predicts that the spot rate is l..
Calculate NPV, Payback, Discounted Payback, IRR and Modified IRR for the following project
Solinux, Inc., is a young start-up company and will not pay dividends on its stock for the next 8 years, since the firm needs to plow back its earnings to fuel growth. The company will then pay a $1.35 per share dividend in year 9 and will increase t..
You are considering buying a car, and want to take out a loan to help you pay for it. You have $3,000 saved to use as a down payment. Your budget allows you to afford a $300 per month loan payment. You can qualify for a 5% interest rate, and the maxi..
The LIBOR zero curve is flat at 4% (continuously compounded) out to 2 years. Swap rates for 3- and 4-year annual pay swaps are 4.5% and 5%, respectively. Estimate the LIBOR zero rates for maturities of 3 and 4 years. Give your answers as annual rates..
Bellinger Industries is considering two projects for inclusion in its capital budget, and you have been asked to do the analysis. Both projects' after-tax cash flows are shown on the time line below. Depreciation, salvage values, net operating workin..
A $1,000 par value bond with seven years left to maturity pays an interest payment semiannually with a 6 percent coupon rate and is priced to have a 5.5 percent yield to maturity. If interest rates surprisingly increase by 0.5 percent, by how much wo..
Three general unsecured creditors are owed $45,000 as follows: Easy Does It Rentals, $15,000; Make Me a Deal Furniture, $5,000; and TV’s r Us, $25,000. After all other creditors are paid, the amount left for distribution to general unsecured creditor..
Can you think of some reasons why the interest rate would change? Or better yet, pretend both you and I are going to the same bank today and both want to borrow 10k. Say that I have lousy credit and you have excellent credit. How can a bank play with..
Is leasing a zero-sum game in the sense that any gain to the lessee is a cost to the lessor?If not, how might both parties gain from a lease transaction? In your answer, explain how the lessee and the lessor analyze the situation, why they might use ..
If you own 450 shares of Alaska Air at $62.08, 500 shares of Best Buy at $70.52, and 300 shares of Ford Motor at $9.31, what are the portfolio weights of each stock?
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