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Consider the following facts for a company undertaking clinical trials on a new drug: The present value of the cost of undertaking Phase 2 clinical
Consider the following facts for a company undertaking clinical trials on a new drug:
- The present value of the cost of undertaking Phase 2 clinical trials at the beginning of these Phase 2 trials is $ 10 million.
- The length of time it takes to go through Phase 2 is 3 years.
- The likelihood of success of Phase 2 is 70%.
- The present value of the cost of undertaking Phase 3 clinical trials at the beginning of these Phase 3 trials is $13 million.
- The length of time it takes to go through Phase 3 to reach commercialization is 2 years.
- The likelihood of success of Phase 3 is 49%.
- The discount rate is 10%.
What is the NPV of the cost of conducting clinical testing tests at the beginning of the Phase 2? Express your answer in millions of dollars to one decimal place.
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