A pharmaceutical company has been able to generate a capital of $5 million from a generous investor. The higher management wants to use the money wisely. The company is looking forward to investing in acquiring patents that will cost around $3 million in the coming year. There is a need to maintain $180,000 of working capital every month to keep running its operations. Currently, the company can barely generate enough revenue to meet its monthly expenses and suffers an occasional loss every two quarters. Below are some of the options for using the capital. Evaluate each one of them and recommend the best one. 1. Invest in acquiring a newly formed company worth $5million that has great technical assets. The company has not been fortunate to generate enough revenue to run its operations. 2. Do not invest the money and use it to keep running the company’s operations. Please note this is not an essay question.
A pharmaceutical company has been able to generate a capital of $5 million from a generous investor. The higher management wants to use the money wisely. The company is looking forward to investing in acquiring patents that will cost around $3 million in the coming year. There is a need to maintain $180,000 of working capital every month to keep running its operations. Currently, the company can barely generate enough revenue to meet its monthly expenses and suffers an occasional loss every two quarters. Below are some of the options for using the capital. Evaluate each one of them and recommend the best one.
1. Invest in acquiring a newly formed company worth $5million that has great technical assets. The company has not been fortunate to generate enough revenue to run its operations.
2. Do not invest the money and use it to keep running the company’s operations.
Please note this is not an essay question.
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