Question 4 Protex is a startup company that was developing a new antiviral drug therapy. Protex just reported a successful completion to Phase I trials. It is now going to launch Phase II trials. Given the following assumptions, what was the net present value of the new therapy at the start of Phase II trials? . Cost of Phase II trials is $11 million (Assume timing of cash flows is at end of year 2) Likelihood of Passing Phase II trials is 65% . Cost of Phase III trials is $24 million (Assume timing of cash flows is at end of year 5) Likelihood of Passing Phase III trials is 75% .NPV of commercialization at end of year 5 is $115 million • Discount rate is 10% . Express your answer in $millions to two decimal places e.g. -$35.12 should be expressed as -35.12 Your Answer: Answer

Question 4 Protex is a startup company that was developing a new antiviral drug therapy. Protex just reported a successful completion to Phase I trials. It is now going to launch Phase II trials. Given the following assumptions, what was the net present value of the new therapy at the start of Phase II trials? . Cost of Phase II trials is $11 million (Assume timing of cash flows is at end of year 2) Likelihood of Passing Phase II trials is 65% . Cost of Phase III trials is $24 million (Assume timing of cash flows is at end of year 5) Likelihood of Passing Phase III trials is 75% .NPV of commercialization at end of year 5 is $115 million • Discount rate is 10% . Express your answer in $millions to two decimal places e.g. -$35.12 should be expressed as -35.12 Your Answer: Answer

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Question z You are working as a finance manager for Fire Fox Transport Ltd. The company is considering to invest in one of the two following projects to buy a new equipment for their storage which is expected to boost the company’s revenue. Each equipment will last 5 years and have no salvage value at the end. The company’s required rate of return for all investment projects is 9.5%. The cash flows of the projects are provided below. Equipment 1 Equipment 2 Cost $157,000 $182,000 Future Cash Flows Year 1 Year 2 Year 3 Year 4 Year 5 67 000 82 000 78 000 64 000 56 000 83 000 94 000 80 000 77 000 73 000 Required: a) Identify which option of equipment should the company accept based on Net Present Value (NPV) method? b) Identify which option of equipment should the company accept based on discounted pay back method if the payback criterion is maximum 3…
Question 1 : Assume you are the finance manager of Almanor Company , and the company is considering investing in one of the three projects . The life for both the Projects X , M and Project Y is 5 years . Project X costs OMR . 20500 , Project M costs OMR . 20500 and Project Y costs OMR.20500 . The discount rate / cost of capital is 4.15 % . Required : Use the following techniques to help company to decide which Machine is better and justify why ? A) Payback period B) Discount payback period C) Net Present Value D) Present value index -Profitability index. Year Project X Project M Project Y 1 7865 3748 8752 2 4567 7609 8393 3 9676 4628 4508 4 7292 8905 7836 5 9900 9904 8287
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Question TwoYou are evaluating two possible projects for your company, both of which involve the development of a new kind of computer mouse. The projects are mutually exclusive, meaning that the company can invest in only one of them. Both projects require an initial investment of $32 million to be made in each of the next three years. Sales and profits will begin in the 4th year, and this is where the two projects differ. Version A, which is more innovative, is expected to have sales in year 4 of $24 million and cash profits of $7.8 million. Profits are expected to increase 6% annually. Version B, which is less innovative but cheaper to produce, is expected to have the same sales in year 4, but profits of $8.9 million. Profits for version B are expected to increase only 4% annually. Assume for simplicity that all cashflows occur at the end of the year. The cost of capital for both projects is 12%.a) Which is the better project? How much is each project worth? b) You have the…
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Required information [The following information applies to the questions displayed below.] A company is considering investing in a new machine that requires a cash payment of $50,939 today. The machine will generate annual cash flows of $21,208 for the next three years. What is the internal rate of return if the company buys this machine? (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided.)
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