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krok68 [10]
3 years ago
5

You work for a pharmaceutical company that has developed a new drug. The patent on the drug will last for 17 years. You expect t

hat the drug will produce cash flows of $10 million in its first year and that this amount will grow at a rate of 4% per year for the remaining 16 years. Once the patent expires, other pharmaceutical companies will be able to produce generic equivalents of your drug and competition will drive any future profits to zero. If the interest rate is 12% per year, then the present value of producing this drug is closest to:
Business
1 answer:
zzz [600]3 years ago
7 0

Answer: $89,537,400

Explanation:

This represents the present value of a growing annuity because the amount received per year is growing by 4%.

= First payment *  \frac{1 - (\frac{1 + Annual growth rate)}{1 + Annual interest rate)}^{no. of years}  }{Annual interest rate - Annual growth rate} \\\\= 10,000,000 *  \frac{1 - (\frac{1 + 0.04)}{1 + 0.12)}^{17}  }{0.12 - 0.04}\\\\= 10,000,000 * 8.95374\\\\= 89,537,400

= $89,537,400

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A middle-aged widowed customer has an investment objective of stable income and would also like to receive occasional "extra" in
Illusion [34]

Answer: Participating preferred

Explanation:

Participating preferred is a stock which pays specific dividends rate to their customers and also receives additional dividends, this is made known Board of Directors and paid by the company, this meets up with the objectives a customers has for investing and having a stable income. It is so known as performance preferred and it gives the holder the benefit of collecting extra dividends.

6 0
3 years ago
Suppose you and a classmate are playing a game where your classmate proposes a division of​ $1.00. ​ Then, you either accept or
AleksandrR [38]

Answer:

  1. Your optimal strategy is to accept the proposed division.
  2. Your optimal strategy is to offer your classmate ​$ 0.49.

Explanation:

An optimarl strategy is one that maximizes a player’s expected payoff. In this case this is a cooperative game.

6 0
3 years ago
Government is lobbied to institute price controls because: Multiple Choice
trapecia [35]

Answer:

people care more about their own surplus than they do about total surplus. 

Explanation:

Price control can either be a price ceiling or a price floor.

A price ceiling is when the government or an agency of the government sets the maximum price for a good or service. It is usually set below equilibrium price.

Price ceiling increase consumer surplus and reduce producer surplus.

A price floor is when the government or an agency of the government sets the least price a good or service can be sold. It is usually set above equilibrium price.

Price floor increases producer surplus and reduces consumer surplus.

Producers would be advocating for a price floor because it increases their surplus, while, consumers would advocate for a price ceiling.

Consumer surplus is the difference between the willingness to pay of a consumer and the price of the product.

Producer surplus is the difference between the price of a product and the least price the seller is willing to sell the product.

I hope my answer helps you

7 0
3 years ago
The value of what you owe minus what you owe is called
aliina [53]
Hey there!

I think you meant to type "value of what you <em>own</em> minus what you owe". Let me know if this assumption isn't correct, though I don't know what the value of what you owe is besides... ya know, what you owe. 

The value of what you own is called you assets. This can include anything of value that you own, particularly your pricier possessions. Think of a vintage family heirloom or a highly–priced article of clothing. Assets, though, includes the value <em>everything</em> that you own that you could possibly put a price tag on if you were certain someone would buy it. 

What you owe is called your liability. This is basically any debt that you owe anyone, whether it be your buddy who footed your lunch bill the other day when you didn't have enough cash or a student loan you used to pay for college. 

Your assets minus your liability is called your net worth. This is basically what you are worth in total. This makes sense, since any debt you owe will be taken out of the amount that you are worth or any money that you have.

Net worth will be your answer. 

Hope this helped you out! :-)
4 0
3 years ago
A business formation is also known as:
Iteru [2.4K]

Business formation is also known as: a business attraction

5 0
3 years ago
Read 2 more answers
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