Question
DURA spends $9 million dollars to research a set of exploratory drugs. The initial research program costs $3M/year and lasts 3 years. It is followed
DURA spends $9 million dollars to research a set of exploratory drugs. The initial research program costs $3M/year and lasts 3 years. It is followed by 1 year field trials (the field trials will cost $2M). Upon completion of the field trials the successful drugs emerging from this process generate total revenue of $15 Million over the following three years before being supplanted by superior drugs from other providers. What are the cash flows by year over the described 7 periods?
Year | 1 | 2 | 3 | 4 | 5 | 6 | 7 | Total |
Cash Out | ||||||||
Cash In |
Based on the information and without considering relevant GAAP dictated reporting requirements complete the below schedule of what you think are the most sensible values for Revenue, Expense, and income each year. (Again, while there is no correct answer here, do not think GAAP. GAAP solutions to R&D spending are sensible.) You should also adopt a hindsight perspectivethat is you are completing this information at the end of the seven year period, not as it is happening. Do be sure that your answer conforms to the Lifetime income law. There is no correct answer here beyond adhering to Lifetime income. So feel free to be imaginative here.
Year | 1 | 2 | 3 | 4 | 5 | 6 | 7 | Total |
Revenue | ||||||||
Expense | ||||||||
Income |
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