Sinclair Pharmaceuticals, a Small Drug Company, Develops a Vaccine That

question 9

Multiple Choice

Sinclair Pharmaceuticals, a small drug company, develops a vaccine that will protect against Helicobacter pylori, a bacteria that is the cause of a number of diseases of the stomach. It is expected that Sinclair Pharmaceuticals will experience extremely high growth over the next three years and will reinvest all of its earnings in expanding the company over this time. Earnings were $1.10 per share before the development of the vaccine and are expected to grow by 40% per year for the next three years. After this time, it is expected that growth will drop to 5% and stay there for the expected future. Four years from now Sinclair will pay dividends that are 75% of its earnings. If its equity cost of capital is 12%, what is the value of a share of Sinclair Pharmaceuticals today?

• A) $20.62
• B) $24.17
• C) $33.96
• D) $33.51

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Definitions:

Neo-Freudians

Psychologists who were influenced by Freud's theories but developed their own theories that differed in significant ways, often emphasizing social and cultural factors.

Controlled Experiments

Experimental designs in which researchers manipulate one variable to determine if it causes an effect on another variable, while all other variables are kept constant.

Patient Histories

These are comprehensive records of a patient's medical background, symptoms, previous treatments, and other health-related information, critical for diagnosis and treatment plans.

Freud's Theories

A comprehensive set of psychological perspectives focusing on the impact of the unconscious mind, sexuality, and early childhood experiences on personality.