Use the Table Below to Answer the Following Question(s) -Calculate the Annual Cost Incurred for the Second Year

question 10

Multiple Choice

Use the table below to answer the following question(s) .
Dresden Pharmaceuticals has decided to go ahead and start clinical trials on a potential new drug. The total R&D costs are estimated to reach around $875,000,000 with clinical trials mounting to
$145,000,000. The current market size is estimated to be around 3,000,000 and is expected to grow at 4 percent every year. The market share Dresden hopes to capture in the first year is 7 percent, and is projected to grow by 25 percent each year for the next 4 years. A monthly prescription is anticipated to generate revenue of $420 while incurring variable costs of $150. A discount rate of 8 percent is assumed. $$\begin{array} { | l | l | } \hline \text { Dresden Pharmaceuticals } & \\\hline & \\\hline \text { Data } & \\\hline & \\\hline \text { Market Size } & 3,000,000 \\\hline \text { Unit (monthly Rx) revenue (\$) } & 420 \\\hline \text { Unit (monthly Rx) cost (\$) } & 150 \\\hline \text { Discount Rate (per cent) } & 8 \\\hline & \\\hline \text { Project Costs } & \\\hline \text { R\&D (\$) } & 875,000,000 \\\hline \text { Clinical Trials (\$) } & 145,000,000 \\\hline & \\\hline\end{array}$$
-Calculate the annual cost incurred for the second year.

• A) $1,224,120,000
• B) $884,520,000
• C) $491,400,000
• D) $638,820,000

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