Question 1025254: Question 2
The following are some selected quotes from senior executives of three different types of companies.
A high technology steel company: “We try to find the best technology, stay ahead of competition, and serve the customer……We’ll make any investment that will pay back quickly ……but if it is something that we really see as a must down the road, payback is not going to be that important.”
A biotech Company: “You cannot really run the numbers, do net present value calculations, because the uncertainties are really gigantic…You decide on the project you want to run, and then you run the numbers (as a reality check on your assumptions). Success in a business like this is much more dependent on tracking rather than of predicting, much more dependent on seeing results over time, tracking and adjusting and readjusting, much more dynamic, much more flexible.”
A Pharmaceutical Company: … at the individual product level – the development of a successful new product requires on the order of $230 million in R&D, spread over more than a decade – discounted cash flow style analysis does not become a factor until development in near the point of manufacturing scale-up effort. Prior to that point, given the uncertainties associated with new product development, it would be lunacy in our business to decide that we know exactly what’s going to happen to a product once it gets out.”
Explain the role of capital investment analysis for these companies.
Answer by ikleyn(52776)   (Show Source):
|
|
|
