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Hansen Pharmaceuticals is considering development of a potential new drug. Testing will cost $15 million today. If the tests are successful, the company will invest
Hansen Pharmaceuticals is considering development of a potential new drug. Testing will cost $15 million today. If the tests are successful, the company will invest $200 million into production and final development starting one year from now. Following that investment, the drug should produce cash flows of $52 million per year for the next 10 years. What is the NPV of this project, assuming the appropriate discount rate is 16% and the initial tests have a 30% chance of success?
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