14 million Americans are addicted to drugs and alcohol. The federal government estimates that these addicts cost the economy $300 billion in medical expenses. Your firm has spent $260 million to date in working on a cure. Now at a crossroads. It can either abandon its program or invest another $70 million today. The firms opportunity cost of funds is 5 percent and it will take another 5 years before approval. Expected year end profits from selling the drug are presented in the table below.
Year 1 $0 year 2 $0 year 3 $0 year 4 $0 year 5 $16,400,00 year 6 $18,300,000 year 7 $ 21,300,000 year 8 $24,700,000 year 9 $ 27,100,00
What is the net present value of the project?