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A Pharmaceutical Company Is Considering Producing a Generic Drug

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A pharmaceutical company is considering producing a generic drug. If it spent $50 million today, the pharmaceutical company could begin selling its drug in one year. The interest rate is 10% and all returns last until the end of time. A pharmaceutical company is considering producing a generic drug. If it spent $50 million today, the pharmaceutical company could begin selling its drug in one year. The interest rate is 10% and all returns last until the end of time.

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a. NPV = -50 + 8/0.10 = $30 million.
b. ...

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