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:

Boomerang Method

A sales technique where objections are turned into reasons to purchase, effectively "boomeranging" concerns into selling points.

Salesperson

An individual who sells goods or services to customers, focusing on meeting sales goals and fostering client relationships.

Prospect's Objections

Concerns or issues raised by potential customers that could impede the sales process.

Expensive System

A system or product that has a high cost, often due to advanced features, quality, or brand prestige.