Acme Drug Inc is entering the fourth year of development of its new cancer suppr

Question

Acme Drug Inc is entering the fourth year of development of its new cancer suppressant drug, Limisol. Following clinical trials, and the granting of a patent, the Food and Drug Administration has given the company permission to sell the drug. Below is a table showing the actual and projected costs and revenue for the firm. Use the table to answer the three questions below. All values are in hundreds of thousands.

Please specify all numerical answers to two decimal places. What is the total value of this project's sunk costs (in hundreds of thousands)? What are the total future costs (in hundreds of thousands)? Considering all relevant information, would you recommend the company continue to manufacture thuis drug?

Explanation / Answer

Your sunk cost is 89. You get this answer by adding all the cost from year 1 to year 3

Your total future costs is 165. You get this by adding all your costs (NOT REVENUE) from year 4 to year 6.

Yes. Your Total Revenue (added together from years 4-6) should be greater then your total future costs from years 4-6. Remember sunk costs should not be considered in your decision.

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