Answered

Welcome to Westonci.ca, where finding answers to your questions is made simple by our community of experts. Connect with a community of experts ready to help you find solutions to your questions quickly and accurately. Explore comprehensive solutions to your questions from knowledgeable professionals across various fields on our platform.

Acron is a large drug company. At the current time, the beginning of year 0, Acron is trying to decide whether one of its new drugs, Niagra, is worth pursuing. Niagra is in the final stages of development and will be ready to enter the market one year from now. The final cost of development, to be incurred at the beginning of year 1, is $15 million. Acron estimates that the demand for Niagra will gradually grow and then decline over its useful lifetime of 20 years. Specifically, the company expects its gross margin (revenue minus cost) to be $1.5 million in year 1, then to increase at an annual rate of 6% through year 8, and finally to decrease at an annual rate of 5% through year 20. Acron wants to develop a spreadsheet model of its 20-year cash flows, assuming its cash flows, other than the initial development cost, are incurred at the end of the respective years. Using an annual discount rate of 7.5% for the purpose of calculating NPV,
Question 1. Which has a greater present value: the gross margin for year 1 or the gross margin for year 8 (the peak year for gross margin)?
:
Question 2. What is the present value of the gross margin at year 16?
:
Question 3. What rate of increase is needed from year 1 through year 8 to have a year 8 gross margin with a present value that is equal to the present value of the year 1 gross margin? Hint: Use goal seek.

Sagot :

Cost of development: 15 Year 1 gross margin: 1.5 6% rise in rate increasing until year 8 5% drop in rate.

What does the term "gross margin" mean?

Gross margin is the amount of money that remains after all direct expenses associated with creating or acquiring the products or services that a business sells have been deducted. The more money the corporation may give toward indirect costs and other expenses like interest, the larger the gross margin.

How do you determine gross margin?

To get a company's gross profit margin percentage, net sales are subtracted from cost of goods sold (COGS) (gross revenues minus returns, allowances, and discounts).To determine the gross profit margin in percentage terms, this amount is then divided by net sales.

To know more about gross margin visit:

https://brainly.com/question/22718027

#SPJ4

Thank you for your visit. We are dedicated to helping you find the information you need, whenever you need it. Thanks for using our service. We're always here to provide accurate and up-to-date answers to all your queries. Find reliable answers at Westonci.ca. Visit us again for the latest updates and expert advice.