6] The following problem is adapted from a case study that a Masters student of mine was asked to prepare for a job interview at a company I will call BioFinancial. Today is t = D. BiotechX, a biotech company, developed a drug [Drng] that helps ght a rare form of cancer. PharmaX, a large pharmaceutical company, has purchased the rights to produce. market, and sell Drng for the next 20 years. According to the terms of the deal. PharmaX has to pay BiotechX each year from t = 1 to t = 20, 3% of the annual sales revenue from the sales ofDrng. BioFinancial wants to make an offer to BiotechX. EioFinancial will pay EiotechK a lump sum payment on at t = i] in exchange for receiving all future cash ows that PharmaX will pay to BiotechX. Assume that the appropriate nominal discount rate for all cash ows is 5%. Your job is to determine the maximum amount that BioFinancial should be willing to pay at t = {II for the deal. Since the future payments BioFinancial will be entitled to depend on Drng sales. your answer depends in part on the estimated future sales of Drng. Based on a combination of population growth estimates for various demographics and incidence rates in each demographic, you estimate that Drng sales will he $100M at t = 1 and the real growth rate ofsales will he 5% peryear unt t = 15. For t = 15 to 2E] you estimate the real growth rate of sales will be -1 5% as the drug patent expires and competition enters the market The -1 5% growth rate estimate is based on historical averages of similar drugs after patent expiration. Assume that entering this deal would imply additional administrative costs for BioFinancial of $100,000 at t = 1, and where the administrative costs would grow at the ination rate until t = 20. where the ination rate is 2% per year