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1 . You work for a pharmaceutical company that has developed a new drug. The patent on the drug will last 1 9 years. You
You work for a pharmaceutical company that has developed a new drug. The patent on the drug will last years. You expect that the drug's profits will be $ million in its first year and that this amount will grow at a rate of per year for the next 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 per year?
The present value of the new drug is $ Round to the nearest dollar.
Suppose you invest $ today and receive $ in years.
a What is the internal rate of returnIRR of this opportunity?
b Suppose another investment opportunity also requires $upfront but pays an equal amount at the end of each year for the next years. If this investment has the same IRR as the first one, what is the amount you will receive each year?The periodic payment that gives the same IRR is
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