In this way, the investors in the stock market will automatically become owners or stockholders of Nucleon. Second, Nucleon can generate cash from loans. This large –sum debt will create a creditor-debtor relationship. The debtor will be Nucleon whereas the creditor will be the company or individual that lends money to Nucleon. The following paragraphs explain why the pilot in-house capital budgeting is the best investment choice in this case study(Louderback, 326).
I recommend that the company pursue its plans to set up its own pilot plant. This is the best choice of the three possible alternatives. For, the second alternative is not a good choice because the third party that will be contracted by Nucleon may not have the capacity or the money to produce the CRP -1 gene clone. Furthermore, the most important factor in not choosing alternative 2 is confidentiality. Meaning, there is a possibility, even a small one, that the subcontracted third party will abuse its responsibility not to divulge or abuse the confidential formula or processes in manufacturing the CRP -1 gene clone(Needles, 367).
In terms of risk, the third party may then set up its own marketing department and to sell the CRP -1 gene clones without reporting such sales to Nucleon and pocket the profits themselves. Further, the third party will then eat away or pirate many of CRP - gene clone clients. As for the other choice which is to license manufacturing and marketing rights to another biotechnology group, it is worst than the subcontract choice here. For, the chosen biotechnology group could then learn the secret formula and confidential processes of mass producing CRP -1 gene clones. In fact, the upfront cash that the Nucleon will receive in exchange for the secret processes and formulas given to the third party to produce the CRP -1 gene clone is only a small matter.