Case Crystal Ball Chapter 3
FNCE 406 - VALUATION
Case: Sensitivity Analysis and Capital Budgeting
James Swayer could feel the pressure as he walked into the executive boardroom with his briefcase containing the data and slides pertaining to his latest proposal.
The last couple of years had not been very good for him. Two of the projects that he had recommended for investment ended up having to be abandoned, and one that he had turned down ended up being a winner for one of the firm’s main competitors.
James knew that this was going to be a long meeting.
James, the product development manager, for Rocky Pharmaco Corporation had joined the firm seven years ago. With an undergraduate degree in Chemistry and an
MBA, James had been fairly successful in his professional career. Prior to working for Rocky Pharmaco, James had been responsible for the launching of three highly successful drugs at another pharmaceutical company. It didn’t take long for the headhunters to find him and shortly thereafter Rocky Pharmaco made him an offer.
At Rocky Pharmaco, however, his track record was not as good. Three of his last five recommendations had cost the company some serious money and he knew this time his job was on the line.
The Rocky Pharmaco Corporation was a mid-size pharmaceutical company with a number of patented drugs in its portfolio. However, two of the patents of its best sellers had recently expired and the generic drug manufacturers had taken away most of their market share (and profits). Although the company had a number of good scientists and doctors conducting research, and a number of projects in the pipeline, the stock price had plunged during the past year mainly due to the poor performance of a couple of its drugs that were expected to be bestsellers.
The Vision Research division of the company had developed a new drug called
GoodVision, for the cure of myopia, which had shown tremendous promise in preclinical trials. The project leader, Mary Moyer, was confident that the product would
Case: Sensitivity Analysis and Capital Budgeting
James Swayer could feel the pressure as he walked into the executive boardroom with his briefcase containing the data and slides pertaining to his latest proposal.
The last couple of years had not been very good for him. Two of the projects that he had recommended for investment ended up having to be abandoned, and one that he had turned down ended up being a winner for one of the firm’s main competitors.
James knew that this was going to be a long meeting.
James, the product development manager, for Rocky Pharmaco Corporation had joined the firm seven years ago. With an undergraduate degree in Chemistry and an
MBA, James had been fairly successful in his professional career. Prior to working for Rocky Pharmaco, James had been responsible for the launching of three highly successful drugs at another pharmaceutical company. It didn’t take long for the headhunters to find him and shortly thereafter Rocky Pharmaco made him an offer.
At Rocky Pharmaco, however, his track record was not as good. Three of his last five recommendations had cost the company some serious money and he knew this time his job was on the line.
The Rocky Pharmaco Corporation was a mid-size pharmaceutical company with a number of patented drugs in its portfolio. However, two of the patents of its best sellers had recently expired and the generic drug manufacturers had taken away most of their market share (and profits). Although the company had a number of good scientists and doctors conducting research, and a number of projects in the pipeline, the stock price had plunged during the past year mainly due to the poor performance of a couple of its drugs that were expected to be bestsellers.
The Vision Research division of the company had developed a new drug called
GoodVision, for the cure of myopia, which had shown tremendous promise in preclinical trials. The project leader, Mary Moyer, was confident that the product would