Orchid Biotech Company is evaluating several different development projects for experimental drugs. Although the cash flows are difficult to forecast, the company has come up with the foll estimates of the initial capital requirements and NPVS for the projects. Given a wide variety of staffing needs, the company has also estimated the number of research scientists required for development project. (All cost values are given in millions of dollars.) Project Number I || III IV V Initial Capital ($) 10 15 15 20 30 Number of Research Scientists 2 3 4 3 12 NPV ($) 10.1 19.0 22.0 25.0 60.2 a. Suppose that Orchid has a total capital budget of $60 million. How should it prioritize these projects? . Suppose that Orchid currently has 12 research scientists and does not anticipate being able to hire more in the near future. How should Orchid prioritize these projects? Cu

Orchid Biotech Company is evaluating several different development projects for experimental drugs. Although the cash flows are difficult to forecast, the company has come up with the foll estimates of the initial capital requirements and NPVS for the projects. Given a wide variety of staffing needs, the company has also estimated the number of research scientists required for development project. (All cost values are given in millions of dollars.) Project Number I || III IV V Initial Capital ($) 10 15 15 20 30 Number of Research Scientists 2 3 4 3 12 NPV ($) 10.1 19.0 22.0 25.0 60.2 a. Suppose that Orchid has a total capital budget of $60 million. How should it prioritize these projects? . Suppose that Orchid currently has 12 research scientists and does not anticipate being able to hire more in the near future. How should Orchid prioritize these projects? Cu

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Example 10.6: Computing EVAS Assume that NASA is allowed to select one of three commercial projects for the next space shuttle mission. Each of these projects has industrial spin-offs that will generate cash for NASA over the next two periods. The cash flows and NPVS of the projects are described below. Cash Flow (in Şmillions) at Date NPV at 2% (in Şmillions) 3.42 3.58 3.50 1 2 Project A Project B Project C -17.0 12 9 -16.8 10 11 -16.9 11 10 What are the EVAS and the discounted value of the EVA streams of the three projects? Assume a discount rate of 2% per period and, for simplicity, no change in capital at date 1. A/so assume that the negative cash flow at date 0 is entirely a capital expenditure, implying that EVA, = 0.
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不 Orchid Biotech Company is evaluating several different development projects for experimental drugs. Although the cash flows are difficult to forecast, the company has come up with the following estimates of the initial capital requirements and NPVs for the projects: Given a wide variety of staffing needs, the company has also estimated the number of research scientists required for each development project (all cost values are given in millions of dollars). a. Suppose that Orchid has a total capital budget of $60million. How should it prioritize these projects? b. Suppose that Orchid currently has 12research scientists and does not anticipate being able to hire more in the near future. How should Orchid prioritize these projects? a. Suppose that Orchid has a total capital budget of $60 million. How should it prioritize these projects? The profitability index for Project I is (Round to two decimal places.) Data table (Click on the following icon in order to copy its contents into a…
Prime Paints is in the process of evaluating two mutually exclusive additions to its processing capacity. The firm's financial analysts have developed pessimistic, most likely, and optimistic estimates of the annual cash inflows associated with each project. These estimates are shown in the following table. Project A Project B Initial investment (CF0) $12,900 $12,900 Outcome Annual cash inflows (CF ) Pessimistic $830 $1,540 Most likely 1,690 1,690 Optimistic 2,490 1,790 a. Determine the range of annual cash inflows for each of the two projects. b. Assume that the firm's cost of capital is 9.1%and that both projects have 18-year lives. Construct a table showing the NPVs for each project for each of the possible outcomes. Include the range of NPVs for each project. c. Do parts (a) and (b) provide consistent views of the two projects? Explain.
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Question 1 The following information for particular project: using the S.A (Sensitive Analysis) to show is the project acceptable economically or not? Sales Quantity 725 Thousands units Price for Sales Quantity $11 Cost for Quantity $9.5 Project life span (virtual) 7 years investment costs 1330Thousands $ Well-Noticed that average cost of capital (i= 9 %). The required: The test of the project net present value under the following situations: A) current situation, B) under the economic changes: Reduced selling price per unit (10%). & (15%) increase in sales & 5% decrease in the cost of the unit produced.
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Alternative Capital Investments The investment committee of Sentry Insurance Co. is evaluating two projects, office expansion and upgrade to computer servers. The projects have different useful lives, but each requires an investment of $860,000. The estimated net cash flows from each project are as follows: Net Cash Flow Year OfficeExpansion Server 1 $240,000 $317,000 2 240,000 317,000 3 240,000 317,000 4 240,000 317,000 5 240,000 6 240,000 The committee has selected a rate of 15% for purposes of net present value analysis. It also estimates that the residual value at the end of each project's useful life is $0, but at the end of the fourth year, the office expansion's residual value would be $300,000. Present Value of $1 at Compound Interest Year 6% 10% 12% 15% 20% 1 0.943 0.909 0.893 0.870 0.833 2 0.890 0.826 0.797 0.756 0.694 3 0.840 0.751 0.712 0.658 0.579 4 0.792…

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