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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. Calculate the profitability index for each project. How should Orchid 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? If instead Orchid had 15 research scientists available explain why the profitability index cannot be used to prioritize projects. Which projects should it choose now?
Describe variable costs and identify an example. Contrast the effects of changes in the activity level on the total variable costs and the variable cost per unit.
You have $53,323.45 in a brokerage account, and you plan to deposit an additional $6,500 at the end of every future year until your account totals $300,000. You expect to earn 8.3% annually on the account. How many years will it take to reach your go..
Purple Enterprises is considering a new three-year expansion project that requires an initial fixed asset investment of $2.67 million. The fixed asset will be depreciated straight-line to zero over its three-year tax life, after which time it will be..
A stock has an annual return of 10.2 percent and a standard deviation of 40 percent. What is the smallest expected gain over the next year with a probability of 1 percent?
The key Components of the financial system is the money market that acts as a fulcrum of monetary operations. Write down the important points under each category mentioned below. Every firm is going on concern, whether domestic or MNC. Explain the te..
Your next assignment is to assume that $10,000 was invested in the stock of General Medical Corporation with the intention of selling after one year. The stock pays no dividends, so the entire return will be based on the price of the stock when sold...
John wants to buy a property for $105,000 and wants an 80% loan. The lender indicates that a fully amortizing loan can be obtained for 30 years at 12% MEY, with loan origination fees (all lender controlled fees) of $3,500. How much will the lender ac..
Company ZZ has a beta of 1.40. The tax rate is 35%, and Company ZZ is financed with 35% debt. What is Company ZZ’s unlevered beta?
Vedder, Inc., has 7.9 million shares of common stock outstanding. The current share price is $62.90, and the book value per share is $5.90. Vedder also has two bond issues outstanding. Assume that the overall cost of debt is the weighted average of ..
Winny's Office Furniture has a contribution margin ratio of 16%. If fixed costs are $187,300, how many dollars of revenue must the company generate in order to reach the break-even point?
Gonzales Corporation generated free cash flow of $81million this year. For the next two years, the company's free cash flow is expected to grow at a rate of 9%. After that time, the company's free cash flow is expected to level off to the industry lo..
What can you say about the value of a BWS put option if its exercise price is $40 and it expires in six months? Calculate the value of a BWS put option if its exercise price is $60 and it expires today.
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