Question

As part of a broad effort to invigorate its pipeline and move more aggressively into biotechnology, a major pharmaceutical company plans to set up a new division dedicated to developing biotherapeutic drugs and research technologies. The company expects to pay $200 million to set up costs of its new division now and $6 million in operating costs each year for the next 12 years. The company estimates that the new division will be able to generate annual revenue of $42 million beginning 7 years from now. What is the conventional B-C ratio for this investment if the company's minimum attractive rate of return is 14% per year and the project life is 12 years? ( By using Present worth method )

Answer 1