36. Orchid Biotech Company is evaluating several development projects for experimental drugs. Although the cash flows are

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36. Orchid Biotech Company is evaluating several 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). Project Number Initial Capital Number of Research Scientists NPV I $10 2 $10.1 || 15 3 19.0 15 4 22.0 IV 20 3 25.0 V 30 12 60.2

a. Suppose that Orchid has a total capital budget of $60 million. How should it pri- oritize these projects?

b. 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?

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Fundamentals Of Corporate Finance

ISBN: 9781292018409

3rd Global Edition

Authors: Berk, Peter DeMarzo, Jarrad Harford

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