You work for a pharmaceutical company which has developed a new drug. The patent on drug lasts
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Question:
You work for a pharmaceutical company which has developed a new drug. The patent on drug lasts for 10 years. Drugs profits will be 5M at the end of the first year and this amount will grow at a rate of 6% per year for the next 10 years. Once patent expires, other companies will produce drug and profits will be zero. What is the present value of the cash flows from the drug if interest rate is 12% per year?
I think i know the formula but am unsure how to do it methodically.
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