Approximately 14 million Americans are addicted to drugs and alcohol. The federal government estimates that these addicts cost the U. economy $300...

Approximately 14 million Americans are addicted to drugs and alcohol. The federal government estimates that these addicts cost the U.S. economy $300 billion in medical expenses and lost productivity. Despite the enormous potential market, many biotech companies have shied away from funding research and development (R&D) initiatives to find a cure for drug and alcohol addiction. Your firm-DrugAbuse Sciences (DAS)-is a notable exception. It has spent $170 million to date working on a cure, but is now at a crossroads. It can either abandon its program or invest another $30 million today. Unfortunately, the firm's opportunity cost of funds is 7 percent and it will take another five years before final approval from the Federal Drug Administration is achieved and the product is actually sold. Expected (year-end) profits from selling the drug are presented in the accompanying table. Should DAS continue with its plan to bring the drug to market, or should it abandon the project? Explain.Year 1 $0Year 2 $0Year 3 $0Year 4 $0Year 5 $15,000,000Year 6 $16,500,000Year 7 $18,150,000Year 8 $19,965,000Year 9 $21,961,500

YearCash flowOppurtunity costNPV 1-$30,0007%$30,517 2$0 3$0 4$0 5$15,000 6$16,500 7$18,150 (units in $'000s)89$19,965 $21,962 The NPv of investing $30 million today is $30.517...