Approximately 14 million Americans are addicted to drugs and alcohol. The federal government estimates that...
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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 $195 million to date working on a cure, but is now at a crossroads. It can either abandon its program or invest another $60 million today. Unfortunately, the firms opportunity cost of funds is 7 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
Year 2
Year 3
Year 4
Year 5
Year 6
Year 7
Year 8
Year 9
$0
$0
$0
$0
$13,100,000
$15,200,000
$16,800,000
$18,300,000
$19,900,000
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.
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