You work for a pharmaceutical company that has developed a new drug. The patent on the

drug will last 20 years. You expect that the drugs profits will be $50 million in its first year (i.e.,

one year from now) and that this amount will decline at a rate of 5% per year for the next 20

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 6% per year?