As Part of a Broad Effort to Invigorate Its Pipeline

question 4

Short Answer

As part of a broad effort to invigorate its pipeline and move more aggressively into biotechnology, a major pharmaceutical company plans to set up a new division dedicated to developing biotherapeutic drugs and research technologies. The company expects to pay $120 million for set up costs of its new division now and $6 million operating costs each year for the next 12 years. The company estimates that the new division will be able to generate annual revenue of $42 million beginning 7 years from now. What is the conventional B- C ratio for this investment if the company's minimum attractive rate of return is 14% per year and the project life is 12 years?

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Definitions:

Case of First Impression

A legal case in which a matter has never been decided before by the courts, thus presenting a new legal issue for determination.

Legal Issue

A matter or dispute subject to laws and legal systems, often involving interpretation of statutes, regulations, and case law.

Jurisdiction

The authority of a court to hear and decide a specific case.

Social Changes

The significant alterations over time in behavior patterns, cultural norms, and societal structures.