This year the owner/founder of J&J Health allocated a total of $18 million to develop new treatment techniques for sickle cell anemia, a blood disorder that primarily affects people of African ancestry and other ethnic groups, including people who are of Mediterranean and Middle Eastern descent. The results are estimated to positively impact net cash flow starting 6 years from now and for the foreseeable future at an average level of $6 million per year.
a. As an initial screening for economic viability, determine both the no-return and i = 10% payback periods.
b. Assume that any patents on the process will be awarded during the sixth year of the project. Determine the project ROR if the $6 million net cash flow were to continue for a total of 17 years (through year 22), when the patents legally expire.