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Metlock Biotech enters into a licensing agreement with Pang Pharmaceutical for a drug under development. Metlock will receive a payment of $10,700,000 if the drug
Metlock Biotech enters into a licensing agreement with Pang Pharmaceutical for a drug under development. Metlock will receive a payment of $10,700,000 if the drug receives regulatory approval. Based on prior experience in the drug-approval process, Metlock determines it is 70% likely that the drug will gain approval and a 30% chance of denial. (a) Determine the transaction price of the arrangement for Metlock Biotech
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