Time-discounted gain

It is possible to define different indexes to understand whether a venture will be profitable [13]. Here we consider the discounted break-even period [14]. This index is defined as the time that must elapse after start-up until the discounted cumulative cash-flow repays the fixed capital investment. The discounted cumulative cash-flow is the sum of expenses and gains sustained or earned in the lifetime of a chemical plant. All these sums of money need to be discounted to their present value. 

Meanwhile, the industry s R D race produced additional HMG-CoA reductase agents. Sankyo s second HMG-CoA reductase inhibitor, pravastatin, licensed to Bristol-Myers Squibb, entered phase III clinical trials in Japan at the same time lovastatin entered phase III clinical trials in the United States. In October 1990, 21 months after Bristol-Myers Squibb submitted the NDA on January 31, 1989, FDA s Endocrinologic and Metabolic Advisory Committee unanimously recommended pravastatin be approved On October 31, 1991, 3 years after approval in Japan, the FDA approved pravastatin with a 1C rating, a new molecular entity (NME) with little or no therapeutic gain over existing therapies. Bristol-Myers Squibb initially offered pravastatin at a direct price discount of 5 percent and a 10 percent discount to wholesalers of lovastatin. By 1993, pravastatin s sales are estimated to reach 500 million. 

The time value of money is the central concept in this traditional approach. Resources invested now are worth more than the same amounts gained later. This is due to the costs of the investment capital that must be paid, or foregone, while waiting for subsequent returns on the investment. The time value of money is represented by discounting the cash flows produced by the investment to reflect the interest that would, in effect at least, have to be paid on the capital borrowed to finance the investment (Rouse and Boff 1999, 225). 

Potential medium-term gains (beyond a 2- to 5-year time horizon) are usually heavily discounted by political leaders and many senior bureaucrats who may be on short-term (often 5-year) employment contracts. There is limited perceived payoff for them in personal terms to recommend radical solutions to a traffic safety problem that lacks political saUency. In our experience, often the response to discussion about a policy option that is progressive will be I don t think my minister could support that, which on further probing (when possible) often leads to an admission that the officer has personal qualms about the suggestion, with his or her minister not even being let into the conversation on the issue. 

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