Forever Young, Inc., has developed a drug that will diminish the effects of aging. Forever Young has spent $1,000,000 on research and development and $2,108,000 for clinical trials. Once the drug is approved by the FDA, which is imminent, it will have a five-year sales life cycle. Laura Russell, Forever Young's chief financial officer, must determine the best alternative for the company among three options. The company can choose to manufacture, package, and distribute the drug; outsource only the manufacturing; or sell the drug's patent. Laura has compiled the following annual cost information for this drug if the company were to manufacture it:

Management anticipates a high demand for the drug and has benchmarked $245 per unit as a reasonable price based on other drugs that promise similar results. Management expects total sales volume of 3,000,000 units over four years; it uses a discount rate of 10 percent.
If Forever Young chooses to outsource the manufacturing of the drug while continuing to package, distribute, and advertise it, the manufacturing costs would result in fixed costs of $ 1,350,00 and variable costs of $74 per unit. For the sale of the patent, Forever Young would receive $300,000,000 now and $25,000,000 at the end of the year for the next four years.
Data (from above) for analysis (below):
Selling price per unit =........................................................................................ $245.00
Decision horizon (life, in years) =..................................................................... ................4
Discount rate (for present value analysis) =...................................................................10.00%
Total volume (units) =........................................................................................3,000,000
Manufacturing costs, if outsoure option chosen:
Fixed costs per year =...............................................................................$1,350,000
Variable costs, per unit =......................................................................... .......$74.00
Sale of patent rights:
Immediate receipt of cash =.....................................................................$300,000,000
Each year, for five coming years =................................................................$25,000,000
Sunk costs:
R&D =................................................................................................$1,000,000
Clinical trials =.......................................................................................$2,108,000
Required:
Determine the best option for Forever Young. Support your answer.

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Cost Category Fixed Costs Variable Cost per unit 5,000,000 380,000 S1,125,000 $2,280,000 70.00 20.00 6.50 1500 Packaging Distribution