As part of a broad effort to invigorate its pipeline and move more aggressively into biotechnology, a major pharmaceutical company plans to set up a new division dedicated to developing biotherapeutic drugs and research technologies. The company expects to pay $116 million for set up costs of its new division now and $6 million operating costs each year for the next 15 years. The company estimates that the new division will be able to generate annual revenue of $45 million beginning 5 years from now. What is the conventional Benefit-to-Cost ratio for this investment if the company's discount rate is 15 % per year and the project life is 15 years?

As part of a broad effort to invigorate its pipeline and move more aggressively into biotechnology, a major pharmaceutical company plans to set up a new division dedicated to developing biotherapeutic drugs and research technologies. The company expects to pay $116 million for set up costs of its new division now and $6 million operating costs each year for the next 15 years. The company estimates that the new division will be able to generate annual revenue of $45 million beginning 5 years from now. What is the conventional Benefit-to-Cost ratio for this investment if the company's discount rate is 15 % per year and the project life is 15 years?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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