You Work for a Pharmaceutical Company That Has Developed a New

question 87

Multiple Choice

You work for a pharmaceutical company that has developed a new drug.The patent on the drug will last for 17 years.You expect that the drug will produce cash flows of $10 million in its first year and that this amount will grow at a rate of 4% per year for the next 17 years.Once the patent expires,other pharmaceutical companies will be able to produce generic equivalents of your drug and competition will drive any future profits to zero.If the interest rate is 12% per year,then the present value of producing this drug is closest to:

• A)$71 million
• B)$90 million
• C)$170 million
• D)$105 million

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Definitions:

Purchase Stage

A phase in the buying process that involves the actual acquisition of a product or service by a consumer or organization.

Consumer Journey

The complete path a consumer travels through from awareness to purchase and loyalty, including all interactions with a brand or product.

Product Sampling

involves providing potential customers with a sample of a product free of charge in order to introduce the product and encourage purchases.

Direct Marketing

A type of advertising strategy that involves sending promotional materials directly to potential customers through mail, email, or other channels, without intermediary media.