Implied Discount rate - NABE

Financial Projections and Discount Rates• Financial projections for the licensing and cost sharing alternatives are interrelated– Projections are the same except for licensing payments under licensingalternative, and cost contributions and PCT payments under cost sharingalternative– Thus, income method builds off of single probability-weighted financialprojections associated with the CSA activity• Discount rates for licensing and cost sharing alternatives are interrelated; anydifference is solely due to– (1) incremental risk associated with cost contributions undertaken in cost sharingalternative, and– (2) risk associated with different payment forms• Are management long-term forecasts (if they even exist) true long-term probabilityweightedfinancial projections accounting for the risk of failure?– Potential use of venture capital discount rates as an alternative to “haircut” onforecasts.11