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Orchid Biotech Company is evaluating several different development projects for experimental drugs. Although the cash flows...

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. 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).

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

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?

Solutions

Expert Solution

jeff jeffy answered 1 year ago
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