Analisis de Costo Beneficio en proyectos de Investigación y Desarrollo

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Risk-adjusted Valuation of R&D Projects R&D management has historically been very much the art of creating value by managing an extraordinary degree of risk. The quantitative tools needed to transform practice from what has been an art to an analytical science have evolved rapidly in the last two decades. (1) We outline another step forward: integrating decision and risk analysis, real options, and stagegate methodologies. * F. Peter Boer OVERVIEW: The decision-tree approach to the valuation of
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    Risk-adjusted Valuation of R&D Projects R&D management has historically been very much the art of creating value by managing an extraordinary degree of risk. The quantitative tools needed totransform practice from what has been an art to an analytical science haveevolved rapidly in the last two decades. ( 1)We outline another step forward:integrating decision and risk analysis, real options, and stagegate methodologies. F. Peter Boer  *   OVERVIEW: The decision-tree approach to the valuation of R&D projects ismathematically identical to a probability-adjusted sequence of real options, whensystematic (or market) risk is set to zero. Besides adding confidence to thecalculation, this observation allows a clean separation of the value contribution of the option to abandon contained in a stagegate approach plus the additional value gained from market risk (as measured by volatility). One consequence isto enable the risk-adjusted valuation of R&D projects on a compact and familiar set of variables: net present value, initial investment, and the estimated cost,duration, and probability of success for each R&D stage. An estimate of the valueof the project at the completion of each successive R&D stage is also a useful output of the method.   Every industrial R&D project plan envisions a payoff. In financial terms, the payoff can be represented by the project’s Net Present Value in the year it iscommercialized. But that payoff is inevitably diminished by what might be called “TheThree Horsemen of the R&D Apocalypse,” I. the time value of money; II. the risk of  1 Boer, F. Peter, “Financial Management of R&D 2002”, Research-Technology Management, July-August 2002, pp. 23-35. * Dr. F. Peter Boer is the CEO of Tiger Scientific Inc. and the John J. Lee Adjunct Professor of Chemical Engineering at Yale University, where he has taught valuation of technology at the YaleSchool of Management. He is the author of the books The Valuation of Technology: Financial Issues in R&D (John Wiley & Sons, NY, 1999) and The Real Options Solution: Finding Total Value in a High-Risk World  (Wiley, 2002). He is a former Executive Vice-president of W.R. Grace& Co. and a Past-president of the Industrial Research Institute. He received his Ph.D. in ChemicalPhysics from Harvard University and is a member of the National Academy of Engineering.Contactfpboer@alumni.princeton.eduor browse tohttp://www.tigerscientific.com.  1  technical failure; and III. the cost of the R&D program itself. Given the value-destroying potential of these three factors, senior management will wish to determine whether itscontinuing R&D investment in R&D is creating value, and, if so, how much. A linear approach to this judgment is inevitably flawed, since it does not include the value of management’s flexibility to respond to changes in the marketplace or in the technologyoutlook.This paper presents a unified approach to the valuation of an R&D project thatintegrates three analytical tools: Discounted Cash Flow, Decision Trees, and RealOptions. (2)The value calculation is basic, once the input parameters have beenestablished. By extension, the sum of the values of its individual projects defines aminimum value for the R&D portfolio. The method presented below is especially wellsuited to run in the context of a stagegate management system.Why might this be important? The Discounted Cash Flow approach is wellestablished, and beloved of finance executives, but is known to systematicallyunderestimate the value of R&D projects (and other intangible assets). The Decision Treeapproach, sometimes labeled “Decision and Risk Analysis” captures the substantial valueof the Option to Abandon. It quantifies unique risk  and creates value by structuring R&D programs into a series of go/no-go decision points that exploit the option to abandon (3). 2 Books on Real Options include Trigeorgis, L., Real Options: Managerial Flexibility and Strategy in Resource Allocation , Cambridge, MA, MIT Press. 1998; Amram, M. and Kulatilaka, N., Real Options, Managing Strategic Investment in an Uncertain World  . Boston, MA, Harvard BusinessSchool Press, 1999; Copeland, T. and Antikarov, V., Real Options: A Practitioner’s Guide , NewYork, Texere LLC, 2001, Newton, David, Paxson, Dean, Howell, Sydney, Cavus, Mustafa, andStack Andrew, Real Options: Principles and Practice. New York, Financial Times Prentice Hall,2001; Mun, Jonathan, Real Options Analysis: Tools and Techniques for Valuing Strategic Investments and Decisions, New York, John Wiley and Sons, 2002.   3 Boer, F. Peter, The Valuation of Technology: Financial Issues in R&D . New York, John Wiley &Sons, 1999, pp. 290-297. 2  This fact has been one reason for the widespread adoption of stagegate methodology,although the rationale has hitherto been largely qualitative (4).The Real Options approach has generally been treated independently fromDecision Trees. It captures value from the management of  market risk, risk that cannot be diversified.In reality, the two approaches are additive, compatible, and form a powerfulcombination. Technically, the Real Options method is more appropriate for valuation of R&D project plans than Discounted Cash Flow, because plans are options, not assets (5).This paper describes how Decision Trees and Real Options can be combined intoa single calculation (Decision Tree/Real Options), reducing valuation to two steps:Discounted Cash Flow followed by Decision Tree/Real Options. After the DiscountedCash Flow step has been performed to obtain a best estimate of business plan value,Decision Tree/Real Options then captures full value from both unique and market risk.In effect, we create a compound option based on multiple options to abandon, which alsoincorporate the value of call options capturing market risk.Who can benefit from this analytic approach? Very broadly speaking, it fitssituations with high risk, exposure to volatile markets, longer time horizons, and progressively increasing development costs. In addition to industrial R&D, venturecapital, petroleum exploration, and screenplay development fit the profile. The methodsare particularly useful when a historical data base is available regarding the odds of  project success, as in the pharmaceutical industry or in the development of new specialty 4 Cooper, Robert G., Winning at New Products; Accelerating the Process from Idea to Launch,2  nd  Ed. Reading, MA, Addison Wesley, 1993. A recent brochure from Stage-Gate, Inc. claims that70% of U.S. companies have adopted this method. 3  chemicals. If the calculations are valid, those using them will invest in opportunities thatcompetitors will pass up, a potentially enormous competitive advantage. Part I: Setting Up the Calculation Framing the Problem While it is not the focus of this paper, it must be realized that the most important,and time-consuming, step in the valuation of technology is to understand the businesssituation and frame the option credibly.(6)The successful practitioner must draw not onlyon his own expertise and industry experience, but on dialog with experts: R&Dmanagers, marketing execs, economic evaluators, and licensing specialists. Their  perspectives will help frame the problem and the issues; and when the numbers are atvariance with expert opinion, it is especially useful to identify and analyze theassumptions which are driving that variance. The framing step is where value is created, but it is facilitated by user-friendly analytical tools, such as those we describe, wherestrategic alternatives and economic adjustments can be readily evaluated. External/Financial Inputs The combined method requires three financial (external) inputs. The first is theRisk-free Interest Rate, typically considered to be the return on Treasury bills. Thesecond is the Cost of Capital for the party funding the project. There are a number of methods for estimating Cost of Capital, such as the Capital Asset Pricing Model (7).These are described and discussed in a variety sources, and will not be described further  5 Boer, F. Peter, The Real Options Solution; Finding Total Value in a High-Risk World,”  New York,John Wiley & Sons, 2002, pp. 137-163. 6 Amram, M. and Kulatilaka, N., Real Options, Managing Strategic Investment in an UncertainWorld  . Boston, MA, Harvard Business School Press, 1999, pp. 90-98. 4
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