Question
A pharmaceutical company is considering spending $1 billion to acquire the production facilities needed to produce a new vaccine. Sales of the new vaccine will
A pharmaceutical company is considering spending $1 billion to acquire the production facilities needed to produce a new vaccine. Sales of the new vaccine will increase revenue by$150 million in the first year.This amount is anticipated to increase by 5% each year.The operating and maintenance cost will increase from $35 million (no new vaccine production) to $50 million (with new vaccine production) per year. The new production facility can be sold for $0.7 billion at the end of seven years.Use the conventional Benefit-Cost ratio to decide whether producing the new vaccine is a good idea for the company.Assume that MARR = 10%.
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