Should the company terminate the program or move


A pharmaceutical company has already spent one million dollars in research for a new drug and now has to make a decision. The company can either terminate the research program or it can move to the development phase. If the company moves to the development phase, it has to invest another one million dollars today to start producing and selling the new drug. However, once the company begins producing and selling the new drug, it expects to make 150,000 dollars at the end of each year forever. Should the company terminate the program or move to the development phase if the opportunity cost of funds is 10% per year?

Request for Solution File

Ask an Expert for Answer!!
Macroeconomics: Should the company terminate the program or move
Reference No:- TGS0871806

Expected delivery within 24 Hours