Which Simulation Yields the Largest Median NPV

question 52

Essay

Which simulation yields the largest median NPV?
In this example we are estimating the net present value of introducing a new drug to market.We have the following information about the market:
· The market size is 1,000,000 and is projected to grow at an average 5%,with a standard deviation of 1%,over the next ten years.
· The market share captured at entry is projected to be between 20% and 70%,with most likely value 40%.
· Three competitors may enter the market in the future,with each one having a 40% probability of entry per year.
· For each new competitor per year,the market share goes down by 20%.
· The marginal profit per unit is $1.80.
· We want to evaluate the project over ten years,using a discount rate of 10%.

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Definitions:

Argument

A set of statements or propositions, where some serve as premises and one as the conclusion, intended to demonstrate the truth of the conclusion.

Implicit Propositions

Propositions that are not directly stated but implied within an argument or statement.

Syllogisms

Syllogisms are a form of deductive reasoning consisting of a major premise, a minor premise, and a conclusion, where the conclusion logically follows from the two premises.

Syllogisms

Logical structures that use deductive reasoning to come to a conclusion based on two or more propositions that are asserted as true, highlighting the relationship between different sets of items.