Essay Example about Synthesis of Anthraquinone

For the purpose of considering the decision to develop the process to synthesize Anthaquinone, it’s a requirement that there is a clear understanding of the associated benefits and risks.

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Anthraquinone uses

A successful project would help in generating a positive NPV and on the other hand, this will increase shareholder equity by a value between 12.5 and 37.5 million. In addition, in case the company becomes successful in developing a process to synthesize Anthaquinone would give the company a competitive advantage in the market for the new Anthaquinone application. A success in the development of a process to increase Anthaquinone production will in return allow the company to continue developing additional uses for Anthaquinone.

Anthraquinone risks

In the process, there is considerable uncertainty at every stage in this development process for which a failure at any stage will lead to financial loss to the company. Since the new uses for Anthaquinone are not patentable the company has an obligation develop the Anthaquinone synthesis process so as to obtain board approval and market it before BASF understands the new use for Anthaquinone.

The best strategy for the company is to continue with the research, development of the process, as well as getting board approval accompanied by marketing of Anthaquinone to new market. From the simulation profile there are favorable results for commercial production in the majority of trials conducted as shown in the Monte Carlo simulation for this case (Anderson, Sweeney & Williams, 2000). Hence, the recommendation is that the board pursue research and development of the best process to synthesize Anthaquinone.

Since its evident that there is uncertainty at every stage of the decision process, it will be wise to create an appropriate risk profile to takes into account the prospects of every tentative outcome into the initial decision and also to the overall NPV calculation. As the process continues its good to consider future uncertainty in the tree to the initial decision so as to establish the predicted NPV of deciding to continue or stop the Anthaquinone research.

Reference

Anderson, D., Sweeney, D., & Williams, T. (2000). An introduction to management science (1st ed.). Cincinnati, Ohio: South-Western College Pub.