This paper illustrates how simulation modeling can be employed to support the R&D decision of a pharmaceutical firm. We do this in the context of a simplified but realistic example, where a drug company has just successfully completed the second phase of a three-phase process for assessing the...

This teaching note provides step-by-step instruction for simulating the net present value and the internal rate of return of a five-year project. The uncertainty lie in the initial level of sales, sales growth rates, gross profit margins, operating expenses before depreciation, and the terminal...