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7 . You are the CFO of a drug company, and you must decide whether to invest 1 5 M dollars in R&D for a
You are the CFO of a drug company, and you must decide whether to invest M dollars in R&D for a new drug. If you conduct the R&D you believe that there is a chance that the research will produce a useful drug. If the research is successful, investment in the drug will require an outlay of million dollars. The drug will likely generate annual profits of million for years starting a year after the million dollar outlay After that, it will generate a cash flow equal to million a year in perpetuity no growth The discount rate is
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