You work for a pharmaceutical company that has developed a new drug. The patent on the drug will last 17 years. You expect that the drug's profits will be $2 million in its first year and that this amount will grow at a rate of 5% per year for the next 17 years. Once the patent expires, other pharmaceutical companies will be able to produce the same drug and competition will likely drive profits to zero. What is the present value of the new drug if the interest rate is 10% per year? The present value is $ 21861455.80 million. (Round to two decimal places.) X That's incorrect. Here is the cash flow timeline for this 17-year growing annuity: Year 0 17 2 + $2(1.05) 3 1 $2(1.05)2 Cash Flow (millions) $2 $2(1.05)16 This is a 17-year growing annuity. The formula for the present value of a growing annuity is: PV= :(--(***)") r- g where C is the first year profits, r is the interest rate, g is the growth rate, and n is the number of periods (in this case, 17 years). OK You work for a pharmaceutical company that has developed a new drug. The patent on the drug will last 17 years. You expect that the drug's profits will be $2 million in its first year and that this amount will grow at a rate of 5% per year for the next 17 years. Once the patent expires, other pharmaceutical companies will be able to produce the same drug and competition will likely drive profits to zero. What is the present value of the new drug if the interest rate is 10% per year? The present value is $21861455.80 million. (Round to two decimal places.)