a) -$25,391,153, Nob) $23,879,899, Yesc) $24,043,600, Yesd) $25,497,589, yes 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 departmenthas given the projections below. If your company goal is a MARR of 6%,a) What is the expected NPVb) Should you recommend this project?30% chance of failure – No Revenue50% chance of approval by FDA, 6 years from now, Revenue $20,000,000/ year for years 6-1520% chance wider approval by FDA, 6 years from now, Revenue $55,000,000/year for years 6-15

NPV means PV of all the benefits which will arise from the project. NPV is computed by taking the…

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

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

See similar textbooks

Similar questions

Use Decision Trees to Evaluate Projects with Real Options - The Stewart Pharmaceuticals corporation is considering investing in developing a drug that cures MS. - The preliminary phase includes trials and will last one year and cost $1 billion. Furthermore, the group believes that there is a 60% chance that the drug passes trials. - If the initial trials are successful, Stewart Pharmaceuticals can go ahead with full-scale production. This investment phase will cost $1,600 million. Production will occur over the next 4 years, resulting in $1 Billion FCF every year. - Assume a discount rate of 10%. - Should the firm proceed with investment?
Parasite Engineering is developing a new product for the parasitic market that services parasites. The opportunity is estimated to be worth $1.0B measured in today’s dollars. The company will need to spend $500M today to begin the research. In five years, the company will have to make a decision as to whether to go into full scale production and begin selling the drug. At that time, the company estimates it will cost $1.5B to move forward. If the appropriate risk-free rate is 2.5%, how high must the annual volatility be to make the project worth beginning?
Investing $2,000,000 in TQM's Channel Support Systems initiative will at a minimum increase demand for your products 3.0% in this and in all future rounds. (Refer to the TQM Initiative worksheet in the CompXM Decisions menu.) Looking at the Round 0 Inquirer for Andrews, last year's sales were $163,608,638. Assuming similar sales next year, the 3.0% increase in demand will provide $4,908,259 of additional revenue. With the overall contribution margin of 34.2%, after direct costs this revenue will add $1,678,625 to the bottom line. For simplicity, assume that the demand increase and margins will remain at last year's levels. How long will it take to achieve payback on the initial $2,000,000 TQM investment, rounded to the nearest month? A. 10 months B. TQM investment will not have a significant financial impact C. 14 months D. 5 months
Your clinic is considering buying a two- module Genexpert System from Cepheid for TB testing. The cost for the equipment is $2,000 with a one-year warranty (replaced if any problem) Your clinic has a 10-year planning period, so it wants to be able to provide TB tests over the next 10 years. With a 10% discount rate, please estimate an annual equivalent cost for this equipment under the following scenario: You only buy the equipment (with one-year warranty) now (time 0). It lasts for slightly more than 1 year (1 day past the warranty period). You then have to buy another one (still $2,000) and it lasts for 3 years. Then buy another one and it lasts for 1 year (1 day past warranty), so you have to buy another one and it lasts for 2 years. And finally, you buy another one and it lasts for 3 years.
Hansen Pharmaceuticals is considering development of a potential new drug. Testing will cost $31 million today. If the tests are successful, the company will invest $110 million into production and final development starting one year from now. Following that investment, the drug should produce cash flows of $61 million per year for the next 9 years. What is the NPV of this project, assuming the appropriate discount rate is 20% and the initial tests have a 40% chance of success? Don't round steps. 2 decimal answer. NPV = $ Suppose Hansen Pharmaceuticals has the option to sell their research for $1 million in the event of an unsuccessful test. What is the value of this option to abandon? Don't round steps. 2 decimal answer. Option to Abandon = $
Your latest project involves the development of a death ray. Initial estimates predict that the project has a 50% chance of failure, with a potential loss of $1,000,000. However, you could hire an expert for $450,000. This is likely to reduce the chance of failure to 20% and the potential loss to $300,000. Questions: a) What is the dollar value of the net benefit of hiring the expert? Should you hire the expert? (Show all calculations for credit) b) As the skeptical accountant, do you have any concerns with this analysis? Be specific in order to receive credit
Suppose we are asked to decide whether a new consumer product should be launched. Based on projected sales and costs, we expect that the cash flows over the five-year life of the project will be $2,000 in the first two years, $4,000 in the next two, and $5,000 in the last year. It will cost about $10,000 to begin production. We use a 10% discount rate to evaluate new products. a. Calculate the NPV of the project. b. Should we take the project?
You are considering two possible marketing campaigns for a new product. The first marketing campaign requires an outlay next year of 2M, and then will pay 0.24M in all subsequent years. The second marketing campaign requires an outlay of 3M next year and then will pay 0.27M in all subsequent years. What is the IRR for the second marketing campaign? *Make sure to input all percentage answers as numeric values without symbols, and use four decimal places of precision. For example, if the answer is 6%, then enter 0.0600.
You are getting into a business and want to take a loan. The bank requires that you show them your projected profits. Develop calculate a forecast for the next five years starting 2022 the following data: First order is for 100,000 units at a selling price of 6kshs per unit. Both numbers are projected to increase by 20% yearly Renting the production facility at 500,000kshs a year for five years Variable manufacturing cost of 1.50kshs per unit with a projected increase of 10% yearly Administration cost of 25,000kshs per year with a likely increase of 5%annually Tax rate is at 36% Develop a five year financial forecast from 2016 showing profits before and after tax
AAK frozen Foods plans to invest in a project that is expected to generate net incomes of AED 20,000, AED 30,000 and AED 60,000 for the next 3 years. If the average book value of its equipment over the 3 years is AED 140,000 and the acceptance decision on this project is based on an average rate of return (ARR) of 26%, should AAK frozen Foods accept the project
You believe you have discovered a new medical device. You anticipate it will take additional time to get the device fully operational, run clinical trials, obtain FDA approval, and sell to a buyer for $290,000. Assume a discount rate of 4% compounded annually. What is the value today of discovering the medical device, assuming you sell it for $290,000 in (a) two years, (b) three years, or (c) four years? Note: Use tables, Excel, or a financial calculator. Round your answers to 2 decimal places. (FV of $1, PV of $1, FVA of $1, and PVA of $1)
Szechwan Gardens, Inc. has been thinking about further expansion of thebusiness. They have $40,000 available to spend. If the required rate of returnis 9%, which of the following should be selected for investment? Assume thatall options have a 7-year life and a PW analysis is preferred.

SEE MORE QUESTIONS

Recommended textbooks for you

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

SEE MORE TEXTBOOKS