Question

Fast forward 12 years, the company is doing very well 12 years, the company is doing very well. You're the CEO! You selected a lo salary with a very high compensation possible but based on the stock value of the financial future rests on the performance of Cureall, while your professional relationship with the board of directors. e but based on the stock value of the company. Your of Cureall, while your professional future rests on your Your two development projects, Allonex and A two development projects. Allonex and Againerall, are supposed to be released in the Cal year. Againerall cost $18 Billion to develop and is expected to be the premier product Tor Cureall and take the company into the future. It costs $10 per treatment and the average person will need 20 semi-painful treatments per year for 10 years to be cured. Tou expect to cure 880M people in total; this product will be huge! ur other program, Allonex, you have just been informed is not successful at its intended disease despite its $8B development cost. It has, however, been determined that it actually cures the same disease as Againerall even though it was intended for different purposes. It costs $20 per treatment and only takes a single treatment for curing the disease. Considering: - that you meet with the board of directors tomorrow - your financial future depends on stock price and professional future on the board's happiness - a public statement and publicity event is set for tomorrow on the release of your new cure - you have a $26B development cost to overcome and 22,300 employees counting on it a. What is the projected revenue, excluding interest effects, for Againerall and Allinonex? The projected profit (revenue less the costs of development)?

Answer 1

Solution:

Project 1 (Againerall)- Total initial investment of the project = $ 18 billions

                   Total Revenue = $ 10 * 880 Mil. * 20 Treatments

                                                = $176 Billions

                Hence projected profit of the project = ($176-$18)billions = $158 billion

Project 2 (Allonex)- Total initial investment of the project = $ 8 billions

                   Total Revenue = $ 20 * 880 Mil. * 1 Treatment

                                                = $ 17.6 Billion

                Hence projected profit of the project = ($17.6-$8)billions = $9.6 billion