Question
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
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:
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. 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
$60
million. How should it prioritize these projects?
b. Suppose that Orchid currently has
12
research scientists and does not anticipate being able to hire more in the near future. How should Orchid prioritize these projects?
Project Number | Initial Capital ($) | Number of Research Scientists | NPV ($) |
I | 10 | 2 | 10.1 |
II | 15 | 3 | 19.0 |
III | 15 | 4 | 22.0 |
IV | 20 | 3 | 25.0 |
V | 30 | 12 | 60.2 |
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