Novartis a pharmaceutical company is engaged in negotiations to acquire an independent research firm.

Novartis a pharmaceutical company is engaged in negotiations to acquire an independent research firm. The cost of the acquisition is estimated to be normally distributed with a mean of 18 million and a standard deviation of 650,000.

If the firm is successfully acquired, Novartis will gain ownership of a patent for a new drug. They estimate that the drug can be produced and sold for a period of 10 years. The selling price per unit will be set at $99. Annual sales can be anywhere between 55,000 and 62,000 with all values in between being equally likely.

Novartis has also determined that the cost of producing the drug will be normally distributed with a mean of $35 and a standard deviation of $2.75

The cost of capital for Novartis is 4.5%

Find the value to Novartis of acquiring the firm.

Run the simulation 2000 times and find the average value to Novartis of acquiring the firm.

Find the 99% confidence interval for the average value to Novartis of acquiring the firm

What recommendations would you make to Novartis given the answer to (3)