Scenario 1 - NPV, Business as Usual

Eliminate the Negative Projects

The team has been working throughout the Pre-development stage in order to get an understanding of the present value of each of the (9) projects by understanding market pricing and the position within the market of each of the prospective projects, among other things. This analysis has given the team accurate information surrounding the overall development costs and costs to commercialize for each project as well. As a part of your normal business strategy, prepare report analyzing the net present value of each project, rank those projects, and provide a Go/Kill recommendation for each.

Scenario 2 - NPV PI, A New Ranking Strategy with a Budget

$25M Budget

As your company looks to manage resources, your director wants to understand how you can maximize your Bang-for-buck on the work your team is doing, and has asked you to add a NPV productivity analysis to your Go/Kill decision process. Additionally, he has capped you at $25M. Prepare report analyzing the NPV PI of each project, rank those projects, and provide a Go/Kill recommendation for each, maintaining your $25M total budget (development + commercialization). Maximize the NPV of your portfolio using this method.

Scenario 3 - ECV PI, Understanding The Expected Commercial Value

$25M Budget

Your director is interested in understanding the expected commercial value method and how it might impact investment decisions. He also wants to maximize the bang for buck so he has asked you to add the expected commercial value and ECV PI to your analysis. You are able to do because your team has worked hard to understand the likelihood of commercial and technical success in each project. Prepare report analyzing the ECV PI of each project, rank those projects, and provide a Go/Kill recommendation for each, maintaining your $25M total budget. Maximize the ECV of your portfolio using this method.

Scenario 4 - ECV PI, A Trimmed Budget, and Modified Risk

$17.5M Budget, Minimize Risk

Your director, given the ability to implement risk into the decision process, wants to evaluate one additional scenario. The VP mention in his staff meeting last week that the market is changing and he may be implementing a 30% reduction in budgets across the company. Assuming this information to be true, your team has created a scenario based on the changing market that has updated rick assessments forboth the probability of commercial and technical success. Using this information, prepare report analyzing the ECV PI of each project, rank those projects, and provide a Go/Kill recommendation for each, maintaining your $17.5M total budget. Maximize the ECV of your portfolio using this method and new data.

1. Discuss what each type of financial tool is (NPV, PI, ECV...), and what are the strengths and weaknesses of each tool.

2. Calculate and fill in the table balnks, place your decision of "GO" or "KILL" under each scenario. Scenario 1 Scenario 1 Present Value Development Cost Commercialization Cost Net Present Value Ranking Decision Zulu 30 3 2 Alpha 2 2 1 Tango 4 0.5 0.75 Beta 5 3 2 Sierra 42 4.5 8 Echo 10 7 5 Romeo 27 4 2 Oscar 8 1 0.5 Lima 69 10 5 Scenario 2 (25M Total Budget) Scenario 2 Net Present Value Development Cost NPV

Productivity Index Commercialization Cost Sum of Costs Ranking Decision Zulu 25 3 Alpha -1 2 Tango 2.75 0.5 Beta 0 3 Sierra 29.5 4.5 Echo -2 7 Romeo 21 4 Oscar 6.5 1 Lima 54 10 Scenario 3 (25M Total budget) Scenario 3 Present Value Development Cost Commercialization Cost Probablity of Commercial Success Probability of Technical Success Value if Commericial Failure Value if Technical Failure Expected Value

before Launch Expected Value before Commercialization Expected Value in Development Expected Commercial Value ECV

PI Sum of Costs Ranking Decision Zulu 30 3 2 56% 41% 0 0 Alpha 2 2 1 34% 79% 0 0 Tango 4 0.5 0.75 54% 56% 0 0 Beta 5 3 2 58% 34% 0 0 Sierra 42 4.5 8 58% 64% 0 0 Echo 10 7 5 45% 76% 0 0 Romeo 27 4 2 37% 71% 0 0 Oscar 8 1 0.5 43% 42% 0 0 Lima 69 10 5 31% 65% 0 0 Scenario 4 (17M Total Budget) Scenario 4 Present Value Development Cost Commercialization Cost Probablity of Commercial Success Probability of Technical Success Value if Commericial Failure Value if Technical Failure Expected Value

before Launch Expected Value before Commercialization Expected Value in Development Expected Commercial Value ECV

PI Sum of Costs Ranking Decision Zulu 30 3 2 46% 41% 0.0 0.0 Alpha 2 2 1 34% 69% 0.0 0.0 Tango 4 0.5 0.75 44% 56% 0.0 0.0 Beta 5 3 2 58% 34% 0.0 0.0 Sierra 42 4.5 8 48% 54% 0.0 0.0 Echo 10 7 5 35% 66% 0.0 0.0 Romeo 27 4 2 37% 71% 0.0 0.0 Oscar 8 1 0.5 43% 32% 0.0 0.0 Lima 69 10 5 31% 65% 0.0 0.0 3. Based on the decision made above, discuss the similarities and differences in thouse outcomes.