You work for a pharmaceutical company that has developed a new drug. The patent on...
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Accounting
You work for a pharmaceutical company that has developed a new drug. The patent on the drug will last
1717
years. You expect that the drug's profits will be
$ 3$3
million in its first year and that this amount will grow at a rate of
6 %6%
per year for the next
1717
years. Once the patentexpires, 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
nbsp 8 % 8%
per year?
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