Rmag Case Study

RMAG is a lucrative infant company thats clientele interests argon focussed on the volatile and potentially hazardous pharmaceutical patience. As such, in order to most accurately value RMAG, a forecast sight must be established that encompasses a sufficient period of time for the result of new projects to stabilise and and so for bare cash flows to plateau. As the project lifecycle matures, a constant growth rate corporation be applied that in turn prompts free cash flows to steady. With a constant growth rate established, the need for afterlife(a) forecasting is alleviated and thereby an accurate forecast horizon can be established. In line with this theory and assumptive there are no future projects endeavoured by RMAG, we are able to apply an appropriate forecast horizon of 15 years. After 15 years of forecasts in our model, we can pragmatically derive a scenario where free cash flows for RMAG taper thus leading to the assumption of constant growth.

This approach is directly in line with the product lifecycle discussed in the Case of the pharmaceutical industry whereby it is suggested that is takes 15 years to pilot a product from the research laboratory bench to the drugstore. The stabilising effect on free cash flows by 2010 is aptly evident in the graph below that is appears most similar to the Bottling Plant discussed in the Case. Whilst enlarged Sur forecasted up until 2006 and RMAG until 2005, these forecast horizons would be deemed grossly malapropos as there is still strong growth universe experienced in free cash flows right up to the point of this period. This would lead to an extensive lack certainty of future free cash flows that would subsequently hinder the viability and accuracy of their valuations. If you need to get a full essay, order it on our website: Ordercustompaper.com

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