You work for a pharmaceutical company that has developed a new drug. The patent on the...

 
 

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You work for a pharmaceutical company that has developed a new drug. The patent on the drug will last 16 years. You expect that the drug's profits will be $5 million in its first year and that this amount will grow at a rate of 3% per year for the next 16 years. Once the patent expires, other pharmaceutical companies will be able to produce the same drug and competition will likely drive profits to zero. What is the present value of the new drug if the interest rate is 11% per year? The present value of the new drug is $ million. (Round to three decimal places.) You work for a pharmaceutical company that has developed a new drug. The patent on the drug will last 16 years. You expect that the drug's profits will be $5 million in its first year and that this amount will grow at a rate of 3% per year for the next 16 years. Once the patent expires, other pharmaceutical companies will be able to produce the same drug and competition will likely drive profits to zero. What is the present value of the new drug if the interest rate is 11% per year? The present value of the new drug is $ million. (Round to three decimal places.)

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