Study On Benchmark Yield Of Biomedical Industry

With the rapid development of biomedical industry in China, amid continuoussupport from the government, the industry exhibits great potential in both the marketand its further development. During the decade more and more capital funds areattracted and become involved. So far, however, there is no accepted standard toevaluate investment projects toward biomedical industry, which in turn makes itdifficult for investors to analysis projects objectively and efficiently. One obviousconsequence of this is that investors routinely rely on the standard benchmark yield ofindustries issued by the government or personal experience to make investmentdecision. Thus a thorough and scientific research on the benchmark yield isfundamental. For investors, the research does not only evaluate of time value of thecapital funds, but also provide a standard benchmark yield of the industry, whichwould facilitate the process of decision-making. For the country, considering the factthat the standard benchmark yield issued by the government has not been updatedsince2006and no analysis of the industry has been conducted, the research is of greatsignificance as well.The article clarifies definition of benchmark yield and its contents at first andthen analysis the benchmark yield of biomedical industry in two different angles.After modeling the rate of benchmark yield, the article makes precise calculation ofthe rate by taking advantage of figure provided by listed biomedical companies.The calculation results based on WACC model and capital growth model were13.65%and14.79%.Article prefer the number14.79%is closer to the actual situationof biomedical industry benchmark yields. Meanwhile the article studies thedistribution of benchmark yield from both the respect of firms and project. And theoutcome shows that the rate of benchmark yield regularly distributes in a certain level,which proves that a standard rate of benchmark yield of biomedical industry exists.The article also further substantiates the point that setting down the benchmark yieldcould reduce agency cost of listed companies efficiently.