PharmaPlus is considering developing a new drug The R D cost is projected to be $2 million, and the drug is expected to generate annual cash flows of $450,000 for 10 years The companys discount rate is 10 Requirements Calculate the NPV of the new drug project Determine the IRR Compute the payback period Assess the profitability index (PI) Should PharmaPlus proceed with the drug development

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Question: PharmaPlus is considering developing a new drug. The R&D cost is projected to be $2 million, and the drug is expected to generate annual cash

PharmaPlus is considering developing a new drug. The R&D cost is projected to be $2 million, and the drug is expected to generate annual cash flows of $450,000 for 10 years. The company’s discount rate is 10%.

Requirements:

Calculate the NPV of the new drug project.
Determine the IRR.
Compute the payback period.
Assess the profitability index (PI).
Should PharmaPlus proceed with the drug development?

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