Assume that a pharmaceutical firm knows it can develop a, Ask an Expert

Economics

Assume that a pharmaceutical firm knows it can develop a new drug in 12 years at an upfront cost of $300m (incurred in year 1). If the firm undertakes the drug development project, it knows it can earn an annual profit of $200m in each year (starting in year 13) that the drug is under patent.

a. Assuming the firm has a 10% discount rate, should it undertake the R&D project? (Show the math to justify your response.)

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Business Economics, Economics

Category:- Business Economics
Reference No.:- M91669481

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