Genesis Pharmaceutical has developed a new diabetes medication. It estimates that the sales volume during the first year will be 200,000 units. The sales volume is projected to grow by 20% each year. The price of each unit is $50 during the first year and will increase by 5% each year. The fixed manufacturing costs for the medication are $500,000 for every 100,000 units, and the variable costs are $25 per unit. The variable costs will increase by 10% each year due to increased material and labor costs. a. Develop a spreadsheet model to estimate the total profit Genesis Pharmaceutical makes on this medication over the next five years. Note: Round your answer to 2 decimal places. Total profit b-1. Convert the future profits into their net present value. If it costs Genesis Pharmaceutical $12,000,000 in R&D to develop the medication, What is the net present value (NPV) of the 3-year profit assuming a discount rate of 3%? Note: Round your answer to 2 decimal places. NPV of the total profit

Genesis Pharmaceutical has developed a new diabetes medication. It estimates that the sales volume during the first year will be 200,000 units. The sales volume is projected to grow by 20% each year. The price of each unit is $50 during the first year and will increase by 5% each year. The fixed manufacturing costs for the medication are $500,000 for every 100,000 units, and the variable costs are $25 per unit. The variable costs will increase by 10% each year due to increased material and labor costs. a. Develop a spreadsheet model to estimate the total profit Genesis Pharmaceutical makes on this medication over the next five years. Note: Round your answer to 2 decimal places. Total profit b-1. Convert the future profits into their net present value. If it costs Genesis Pharmaceutical $12,000,000 in R&D to develop the medication, What is the net present value (NPV) of the 3-year profit assuming a discount rate of 3%? Note: Round your answer to 2 decimal places. NPV of the total profit

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter16: Cost-volume-profit Analysis

Section: Chapter Questions

Problem 10E: Schylar Pharmaceuticals, Inc., plans to sell 130,000 units of antibiotic at an average price of 22...

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