A system dynamics decision support tool for bioproduct industry stakeholders who want to investigate how their decisions can impact the process of bioproducts gaining U.S. market share.
We have to be careful of the interpretation of the rate of return r in the valley-of-death equation, V > Σi=1N (( Ii (1 + ri)) / 𝚷j=n+1-iNPj). The ri are not the annual rates of return, but instead are the rates over the whole investment, i.e. the quantity Ii(1+ri) represents the total cost of investment Ii, accounting for the cost of capital, financing, etc.
I think that we should replace (1 + ri) by (1 + r'i)T(i), where T(i) is the expected number of years before completion of the last stage and r'i is the required annual rate of return, which might be a constant r' independent of stage i.
Also, I think that a better name for expected internal investment amount by stagegate would actually be expected required investment value at stagegate, since it is the threshold that NPV (or other valuation) must exceed for the investment to be worthwhile.
@rjhanes @Lauren-Sittler
We have to be careful of the interpretation of the rate of return r in the valley-of-death equation, V > Σi=1N (( Ii (1 + ri)) / 𝚷j=n+1-iN Pj). The ri are not the annual rates of return, but instead are the rates over the whole investment, i.e. the quantity Ii(1+ri) represents the total cost of investment Ii, accounting for the cost of capital, financing, etc.
I think that we should replace (1 + ri) by (1 + r'i)T(i), where T(i) is the expected number of years before completion of the last stage and r'i is the required annual rate of return, which might be a constant r' independent of stage i.
Also, I think that a better name for
expected internal investment amount by stagegatewould actually beexpected required investment value at stagegate, since it is the threshold that NPV (or other valuation) must exceed for the investment to be worthwhile.