Dresden Pharmaceuticals has decided to go ahead and start clinical trials on a potential new drug. The total R&D costs are estimated to reach around $875,000,000 with clinical trials mounting to $145,000,000. The current market size is estimated to be around 3,000,000 and is expected to grow at 4 percent every year. The market share Dresden hopes to capture in the first year is 7 percent, and is projected to grow by 25 percent each year for the next 4 years. A monthly prescription is anticipated to generate revenue of $420 while incurring variable costs of $150. A discount rate of 8 percent is assumed.

Dresden Pharmaceuticals
Data
Market Size	3,000,000
Unit (monthly Rx) revenue ($)	420
Unit (monthly Rx) cost ($)	150
Discount Rate ( per cent)	8
Project Costs
R&D ($)	875,000,000
Clinical Trials ($)	145,000,000

Calculate the annual cost incurred for the second year.

A. $638,820,000

B. $1,224,120,000

C. $884,520,000

D. $491,400,000

Which of the following conditions is the optimal solution to the newsvendor problem, where Q is the quantity to be purchased, and D is demand?

A. Q / D = 0
B. Q > D
C. Q = D
D. D > Q

Calculate cumulative net profit at the fourth year.

A. $1,073,538,462
B. $3,189,634,800
C. $1,494,838,800
D. $1,312,041,240