Application of DCF and rDCF methods valuation to pharmaceutical projects

The paper examines problems of analysis of projects in the sphere of pharmaceuticals. It is underlined that in the case of pharmaceuticals traditional approach based on discounted cash flows can not meet the requirements because of the unexpected risks and profits. So additional tools are required. For this purpose the paper proposes strategic net present value (rNPV). The method allows take to account managerial flexibility and consequently take a decisions at each stage of the development of the project.

discounted cash flow method, risk-expanded net present value, probability, innovation project, project management, net present value