Pfizer Is Planning to Embark on Developing a New Medicine

question 25

Multiple Choice

Pfizer is planning to embark on developing a new medicine for the cure of common cold. If undertaken, the project requires $10 million dollar on R&D, every year for 5 years. The medicine will be marketed in Year 6 and net returns are estimated to be $10 million for the next 5 years at the end of which Pfizer plans to sell the formula to its competitor for $1 million. If corporation requires a ROI of 15%, what is the NPV for the project?

• A) $16.6 million
• B) -$16.6 million
• C) $16.85 million
• D) -$16.85 million
• E) $0.123 million

---

Definitions:

Expenses

Outflows of resources or incurring of liabilities from a company's operations, including costs for materials, labor, and overhead required to generate revenue.

GAAP

Generally Accepted Accounting Principles, which are a standardized set of accounting rules, procedures, and conventions for reporting financial information.

IFRS

International Financial Reporting Standards are worldwide guidelines for accounting, utilized in the creation of financial statements.

Depreciation

Apportioning the cost of a tangible asset in a systematic way over its period of usefulness.