Microbion Biosciences is a Bozeman, Montana, USA, biotechnology that is developing a new class of antibiotics. The primary market that Microbion intends to develop is the diabetic foot ulcer (DFU) market for North America. The International Diabetes Federation Atlas indicates that in 2015 there were 44 million people in North America with diabetes, and this population is expected to grow to 61 million in 2040. Microbion's studies indicate that about 10% of people with diabetes in North America develop chronic foot ulcers and would benefit from their product. Microbion believes that it will successfully have a DFU product on the market by Jan 1, 2019. The total market unit sales in 2019 is forecast to be 440,000 units, and Microbion believes that it can get 20% of that total market. Microbion forecasts that total market size will increase by 1.5% each year through at least 2040. Unfortunately, Microbion's patent protection expires on December 31, 2026, so Microbion expects to have only 7 years of patent protection for its product. Upon the expiration of the patent, generics are expected to enter the market and decrease the market price of the product such that cash flows after the patent expiration will have zero net present value. The expected product price for the Microbion DFU product is $1200, and that price is expected to hold through Microbion's patent protection period which ends at the end of 2026 (although inflation would be expected to push prices up, the market power of federal government is expected to keep prices constant). Prices will adjust downward in 2027 when generics enter the market. The total costs of goods sold of producing the product are 20% of sales, and the sales, general and administrative expenses are expected to be 30% of sales. In order to continue with this project, Microbion will need to invest $21,000,000 on January 1, 2017 for the Phases 3 study which is expected to be completed in September 2017. This investment will be depreciated on a straight line basis for 7 years (through 2025), but the first year of depreciation will not occur until 2019, which is the first year of positive revenue. In addition, Microbion will need to increase the Net Working Capital of the company in 2019 by $2,000,000. These funds WILL NOT be returned at the end of the project. The probability that Microbion will successfully complete the Phase 3 study and have its DFU product accepted for the market is 75%. You have done sufficient due diligence on the numbers that Microbion has provided and have confirmed from your own sources that they are appropriate. You have determined that the appropriate cost of capital for this project is 18%. The corporate tax rate for Microbion is 35%. You also know that a multiplier of 1.2 times last year's sales is a multiplier used for valuation in the antibiotic industry. Based on the information that you have already collected and any assumptions that you need to make, determine a valuation for Microbion as if it is January 1, 2017. Clearly explain and justify how you arrived at this valuation. Discuss the different valuation approaches that are available to you, and explain why you used the approach(es) that you used.