Present value of the cost of the clinical trials

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Problem: You are evaluating a new medical procedure that is undergoing clinical trials. Stage 1 trials were successful and the company is embarking on Stage 2 trials. Experts have told you that the probabilities of the procedure successfully passing Stage 2 and Stage 3 are 60% and 70% respectively. The costs of Stage 2 and 3 trials are $10 and $15 million dollars, respectively, and they will be incurred one and four years from now, respectively. You apply a discount rate of 12% for valuation purposes.

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Question: What is the present value of the cost of the clinical trials?

Reference no: EM132439154

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