A pharmaceutical company needs to estimate the maximum amount to spend on R&D for a new type of diet drug. It is estimated that three years of R&D spending will be required to develop and test market...

A pharmaceutical company needs to estimate the maximum amount to spend on R&D for a new type of diet drug. It is estimated that three years of R&D spending will be required to develop and test market the drug. After the initial three years, an investment in manufacturing and production will be required in year 4. It is estimated today that net cash inflows for six years will be received from sales of the drug. The following cash flow diagram summarizes the firm’s

estimates: