Calculate the annual worth for all possible combinations

Assignment Help Business Management

Reference no: EM131375562

Refer to given Problem. As a part of Pharma-Excel's feasibility- study, they want to include information on the acceptance attitude of the public toward the new vitamin C product. Regardless of the optimistic, expected, and pessimistic scenarios on research and development, there is a chance the general public may not feel comfortable with the new product because it is based on a new technology. They estimate that the likelihood of the public accepting the product (and purchasing it) is 33.3% and not accepting it is 66.7%. The expected annual profit after the research is $1 000 000 if the public accepts the new product and $200 000 if the public does not accept it.

(a) Calculate the annual worth for all possible combinations of three R&D scenarios (optimistic, expected, and pessimistic) and two scenarios on public reaction (accept or not accept). Pharma-Excel's MARR is 15%.

(b) Using the annual worth information as the payoff information, build a decision tree for Pharma's problem. Should they proceed with the development of this new vitamin C product?

Problem :
Pharma-Excel is a pharmaceutical company They are currently studying the feasibility of a research project that involves improvement of vitamin C pills. To examine the optimistic, expected, and pessimistic scenarios for this project, they gathered the data shown below. Wha t is the expected annual cost of the vitamin C project? Assume Pharma-Excel's ALARR is 15%. Note that the lead time is different for each scenario.

	Optimistic	Expected	Pessimistic
Research and development costs (at the end of research)	$75,000	$240,000	$500,000
Lead time to production(years)	1	2	-
Probability	0.15	0.5	0.35

Reference no: EM131375562

Questions Cloud

Human resources qualifications and consequences : What are the key Human resources qualifications and consequences APPC should look for in a Human resources professional if they choose to hire someone in that capacity?

Describe how sound is used in predictive maintenance : How can a worn belt be identified? How is a temperature-pressure-relief valve on a hot water boiler tested?

What was the role of hrm in supporting this cultural shift : Assessing how effective organizations support employee satisfaction, engagement, and commitment as they relate to workplace diversity and inclusion.Analyzing the HRM professional's role in supporting a culture of diversity through organizational de..

Employment relationships : Employment Relationships. William Moore owned and operated Moore Enterprises, a wholesale tire business, in Idaho. While in high school, Williams son, Jonathan, worked as a Moore employee. Jonathan accepted but retained Morecedes Tire. On the first d..

Calculate the annual worth for all possible combinations : Calculate the annual worth for all possible combinations of three R&D scenarios and two scenarios on public reaction (accept or not accept). Pharma-Excel's MARR is 15%.

List items to be checked when servicing a belt-drive systems : The supply voltage to a system drops below the minimum voltage when the unit is operated. What could be causing this?

What are the main methods of process improvement : What are the main methods of process improvement in healthcare and demonstrate your understanding of The Model of Improvement healthcare with an example from your experience?

What details did your peer identify that you did not : What details did your peer identify that you did not? What did you identify that your peer did not? What other comments or questions do you have for your peer?

Complained to jane about carrie methods : At those moments, Jane would agree with Carrie that facing up to their problems was important, and she'd end the meeting by thanking Carrie for being such a responsible watchdog for the team. But Later, Jane would get the nagging feeling that som..

User Account

All Pages