Pharmaceutical firms, oil and gas companies, and other ventures inevitably incur costs on unsuccessful investments in new projects (e., new drugs or…

aIncludes other investments not at issue here.

During the year, the new team spent $5 million on R&D activities, of which $4,500,000 was for unsuccessful ventures. The new management team has included the $4,500,000 in the current end-of-year investment base because “You can’t invent successful drugs without missing on a few unsuccessful ones.”

Required:

a. What is the ROI for the base year and the current year? Ignore taxes. (Enter your answer as a percentage rounded to 1 decimal place (i.e., 32.1).)

a-1. If R&D is expensed:

a-2. If R&D is capitalized:

b. What is the amount of the bonus that the new management team is likely to claim? (Enter your answer in dollars, not in

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