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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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What loan repayment plan is based on annual income?
Alisiya [41]

Answer:

contingent repayment plan

Explanation:

Are there othr options?

It is based on the borrower's income and the total amount of debt. Monthly payments are adjusted each year as the borrower's income changes

4 0
3 years ago
Assume the following capital structure: Preferred stock, 5%, $50 par value, 1,200 shares issued and outstanding with dividends i
Natali [406]

Answer:

$12,000

Explanation:

The computation of the preferred dividend in the case when the preferred stock is cumulative is given below:

= Dividend percentage × par value of each share × number of shares issued × number of years

= 5% × $50 × 1,200 shares × 4 years

= $12,000

Hence, the preferred dividend in the case when the preferred stock is cumulative is $12,000

3 0
3 years ago
Departmental overhead rates are preferred over plantwide rates when: Multiple Choice The plant makes a single product. The produ
Ray Of Light [21]

Answer:

The products use different amounts of different processes in different departments

Explanation:

Plant Wide overhead rates is basically a single rate that is used to assign to the company's manufacturing overhead costs. This is best used when a company produces single product. On the other hand, if the manufacturing of different products with use of different processes is being done then using plant wide rate (which applies only a single rate) might not be appropriate.

The activities of the diversified products would have a high correlation with regard to the input of overheads. Therefore, the departmental overhead rates are preferred when the products use different amounts of different processes in different departments.

5 0
3 years ago
6) The ________ section of the statement of cash flows includes increases and decreases in long-term assets. A) investing activi
Yuki888 [10]

Answer:

A) investing activities

Explanation:

The cash flow statement includes three sections which are Operating Activities, Investing Activities and Financing Activities. This means that non-cash operating activities is not a section in the cash flow statement.

In the section, operating activities is where the decrease or increase in the current assets and current liabilities is mentioned. Therefore, this sections does not state the long term assets affects. Financing activities refers to those funds that are affected by the change in non-current liabilities (such as bank loans) and capital.

Investing activities is the part in the cash flow statement where the impact of non-current assets (long term assets) are referred out such as acquisition and/or selling of properties, plant and equipment. Therefore, part A) investing activities is the correct answer.

7 0
3 years ago
A woman marries her butler. Before they were married, she paid him $60,000 per year. He continues to wait on her as before (but
Svetach [21]

Answer:

D. Leave GDP unchanged

Explanation:

This is because the Husband is now involved in the category of "values of services not paid for". When calculating for GDP, those services aren't included or accounted for.

After marriage, the butler is no longer an employee of the woman and the services he provides for her now as an husband are not recorded as final economic activity thus the GDP decreases initially by $60,000 and then remains unchanged.

3 0
3 years ago
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