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:

Pro-Protestant

Favoring or supporting the Protestant faith or its adherents.

Anti-Temperance

Opposition to the temperance movement, which advocated for the moderation or total abstinence from alcohol consumption.

Pro-Slavery

Supporting the institution of slavery; typically refers to historical positions favoring the legal and social system wherein people are owned by others.

Pro-Immigration

An attitude or policy stance that supports or favors the entrance of immigrants into a country.