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Pronghorn Biotech enters into a licensing agreement with Pang Pharmaceutical for a drug under development. Pronghorn will receive a payment of $8,700,000 if the drug
Pronghorn Biotech enters into a licensing agreement with Pang Pharmaceutical for a drug under development. Pronghorn will receive a payment of $8,700,000 if the drug receives regulatory approval. Based on prior experience in the drug-approval process, Pronghorn determines it is 80% likely that the drug will gain approval and a 20% chance of denial (a) Determine the transaction price of the arrangement for Pronghorn Biotech. Transaction price $
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