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Apr 3, 2024
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Summative Assessment
University of Phoenix
Fin/571 Corporate Finance
Professor Sommers
12/11/2023
Walgreen information
Over the years, the pharmaceutical industry has been one of the leading sectors in today's history. As technology and science continues to advance at a rapid rate it allows companies like Walgreens to focus on additional programs, research strategies, and long-term decision that aligns with the company mission.
Why Funding
Previously, the company has neglected its mission and operating strategies due to high demands and business pressures from its patients. However, external factors such as the recent pandemic which is one reason Walgreens must reconstruct its long-term goals and focus on ways
the company expands its research and development to create a breakthrough anti-viral drug for patients 65 years and older that is strong enough to attack 5 different viruses such as the flu, covid, upper respiratory, RSV and pneumonia with no side effect to patients and if taken properly, patients will never know their body experience and invasion of germs or bacteria. Currently, the pharmaceutical industry has a variety of anti-viral drugs such as Xofluza which helps with the flu, Moderna to help with COVID Niresvimab to treat RSV, and. Levaquin to treat
pneumonia leaving consumers no choice but to take multiple anti-viral drugs for treatment. This new antiviral drug will be strong enough to treat all viral infections listed with a single pill every 6 months reducing the amount of medication being prescribed to patients =. The active ingredient in antiviral drugs will trigger different receptors within the immune system for an effective response that will fight the virus accordingly. Reasoning for Funding
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-will require effective research to ensure the new drug will not cause any side effects - A market/ clinical trial run, can consist of surveying people to do a market trial on the new drug
to see how their body respond to new ingredient -monitoring and evaluating patients 6 months after trial run -effective research on chemicals, and ingredients that remain in compliance with the Food and Drug Administration. Source of Funding:
In this report, we will assess the funding source needed for new drug research, previously
Walgreens sold its AmerisoureBergen shares increasing the company capital by 28% to build the
company's healthcare strategy and, allowing the company to spend at least one-third of its revenue on research and development of new drugs. Selling shares of the company will improve the overall performance of the company's financial health by reducing the company debt to equity ratio and avoiding outside sources of funding. Selling company shares could potentially increase the company capital by an additional 20% allowing the company to utilize the additional
funds for research on new antiviral medication for seniors. Requirement for the funding source
Before selling any company shares, Walgreens must first determine the value of the share, know what your shareholders want, and, develop an effective marketing strategy. As of the close of today, Walgreens's current stock price is 25.20 and is considered overvalued which can be appealing to investors who are looking for a short position, this will allow Walgreens to open a short position in borrowing company shares to generate profit. The company's current EPS from its operation is down by 73% and its profit margin remain small However, consumer will forever and continuously seek healthcare allowing the company to generate a higher profit
margin. Currently, Walgreens's revenue for the 3
rd
quarter increased by 9%, and their price earing is 5.2 compared to their competitor CVS who price to ratio is above 13
%
Risk associated with specific funding and why you choose it When selling stock, Walgreens is taking the risk that they could potentially not make enough profit to position their focus on additional research and development for a new antiviral drug, which can lead to financial, loss, loss of ownership, and loss of control for Walgreens. However, one advantage to selling equity is it eliminates any new debt and allows the company to gain additional capital.
Estimate the cost of capital. Walgreens needs to raise capital to fund its new research and development program for the new anti-viral drug for seniors. Currently, the company may need to raise an additional 2 billion in capital to begin its initial stage. The first 1 billion is to recoup the initial loss for 2023 as their 4
th
quarter loss per share was $0.23and EPS was down by $0.70 however for example, if Walgreens can sell enough stock to raise their first million by selling stock and their shareholders
expect a 5 or 6% on their investment the company equity would be either 5 or 6%. Currently, the
company's total market value is $21.77 billion with a corporate tax rate of 29.5%.
Conclusion Only about 10% of new drugs are approved by the FDA, and the average cost spent on research and development is more than 1 billion including clinical trials, laboratory testing, and fees for those that did not make it past the initial testing stage. These estimates will include the Walgreens capital cost, the value and estimates of other forgone research needed during the research and development stage. The development of a new antiviral drug could progress at a rapid rate or take several years to be approved and ready for market distribution however, during
such time the company will not receive any financial gain on its investment during the drug development stage. Reference
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View Policies
Current Attempt in Progress
-/0.1 E:
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eTextbook and Media
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Using multiple attempts will impact your score.
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years
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$7 million
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$9 million
$3 million
$11 million
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The change in working capital for year 3 is
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27
Which of the following should be included in the cash flow
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I. Money already spent for research and development of
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II. Capital expenditures for equipment to produce the new
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II. Increase in working capital needed to finance sales of
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V. Interest expense on the loan used to finance the new
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