Mylan Pharm is investing in a new cancer treatment gene therapy. They have projected the cost of final clinical trials to be $90,000,000 (now) and for those to take 4 years to complete. They then have to get FDA approval, which will take an additional 2 years. The regulatory departmen has given the projections below. If your company goal is a MARR of 6%, a) What is the expected NPV b) Should you recommend this project? 30% chance of failure – No Revenue 50% chance of approval by FDA, 6 years from now, Revenue $20,000,000/ year for years 6-15 20% chance wider approval by FDA, 6 years from now, Revenue $55,000,000/year for years 6-15
Mylan Pharm is investing in a new cancer treatment gene therapy. They have projected the cost of final clinical trials to be $90,000,000 (now) and for those to take 4 years to complete. They then have to get FDA approval, which will take an additional 2 years. The regulatory departmen has given the projections below. If your company goal is a MARR of 6%, a) What is the expected NPV b) Should you recommend this project? 30% chance of failure – No Revenue 50% chance of approval by FDA, 6 years from now, Revenue $20,000,000/ year for years 6-15 20% chance wider approval by FDA, 6 years from now, Revenue $55,000,000/year for years 6-15
Intermediate Financial Management (MindTap Course List)
13th Edition
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Eugene F. Brigham, Phillip R. Daves
Chapter14: Real Options
Section: Chapter Questions
Problem 3MC: Tropical Sweets is considering a project that will cost $70 million and will generate expected cash...
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Question
a) -$25,391,153, No
b) $23,879,899, Yes
c) $24,043,600, Yes
d) $25,497,589, yes
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