rocky mountain
【SID:310316707 Name: Min Ouyang】
Rocky Mountain Advanced Genome Inc.
Case Analysis Report
Question 1: Forecast Horizon and Free Cash Flow Projections
1 Forecast Horizon
In order to derive the forecast horizon, an approach of product-life cycle is used to evaluate the reasonable forecast horizon. Proper forecast horizon need to extend into the future in which the firm is under a steady-state, slow-growth or no-growth condition. By that time, the firm step into the maturity and decline period of the product-life cycle.
Rocky Mountain Advanced Genome Inc. (RMAG) manufactures three different kinds of pharmaceutical products: diagnostic test kits related products which are supposed to be available in 12 months, agricultural bio-genetic engineering related products which are expected to generate revenues in 24-36 months, and human therapeutics related products which are still in the early period of research. Only after the third section of RMAG’s business enters into the slow maturity periods, should the whole company enjoy no excessive growth opportunities thus it determines the projections of the forecast horizon.
The following factors might determine the length of the high-speed growth period of
RMAG: the size of the company, competition advantage and the barriers for new entry. While there are pharmaceutical companies with similar business in the market, it is assumed that RMAG can only enjoy a steady growth period of 5 years after the breakthrough of the products of third section, and then the company experience another 2 years’ slow-down growth to enter into the maturity period.
Since the case only provides the estimation of RMAG managements and Big Sur’s director, it is assumed that the “breakthrough” do experience in the 8th year based on the average forecast of the potential buyer and seller.
Based on above analysis, it is assumed that forecast horizon is 15 years (1996-2010).
2 Free Cash Flow Projections
Since most of the data
Rocky Mountain Advanced Genome Inc.
Case Analysis Report
Question 1: Forecast Horizon and Free Cash Flow Projections
1 Forecast Horizon
In order to derive the forecast horizon, an approach of product-life cycle is used to evaluate the reasonable forecast horizon. Proper forecast horizon need to extend into the future in which the firm is under a steady-state, slow-growth or no-growth condition. By that time, the firm step into the maturity and decline period of the product-life cycle.
Rocky Mountain Advanced Genome Inc. (RMAG) manufactures three different kinds of pharmaceutical products: diagnostic test kits related products which are supposed to be available in 12 months, agricultural bio-genetic engineering related products which are expected to generate revenues in 24-36 months, and human therapeutics related products which are still in the early period of research. Only after the third section of RMAG’s business enters into the slow maturity periods, should the whole company enjoy no excessive growth opportunities thus it determines the projections of the forecast horizon.
The following factors might determine the length of the high-speed growth period of
RMAG: the size of the company, competition advantage and the barriers for new entry. While there are pharmaceutical companies with similar business in the market, it is assumed that RMAG can only enjoy a steady growth period of 5 years after the breakthrough of the products of third section, and then the company experience another 2 years’ slow-down growth to enter into the maturity period.
Since the case only provides the estimation of RMAG managements and Big Sur’s director, it is assumed that the “breakthrough” do experience in the 8th year based on the average forecast of the potential buyer and seller.
Based on above analysis, it is assumed that forecast horizon is 15 years (1996-2010).
2 Free Cash Flow Projections
Since most of the data