skip to Main Content
The smarter way
to do assignments.

Please note that this is just a preview of a school assignment posted on our website by one of our clients. If you need assistance with this question too, please click on the Order button at the bottom of the page to get started.

A pharmaceutical company is in the process of developing a new
drug. The development is planned in two stages. The first stage
costs one million dollars, and the second stage costs two million
dollars. If the development is successful it will result in
revenues of five million dollars. All dollars are in present value,
and discounting is not necessary. The chance of successful
development is 72%. If the development effort is a failure, there
would be no revenue, and all the investment will be a loss. The
company has the option not to develop the new drug.
Draw a decision tree to model this problem. Solve the problem by
rolling back the tree.
The company has the option of conducting a test at the end of
the first phase, at a cost of $250,000. There is an 80% chance that
the drug passes the test, and a 20% chance that the drug fails the
test. If the drug passes the test there is a 90% chance that it
will be a success and a 10% chance it will be a failure. Draw a
decision tree including the test option. Solve the decision tree by
rolling back the tree.

$5 mn

 

Successful Development (0.72)

 

Develop

 

Compare the results for 1 and 2, and debate if testing improves
the company’s decision-making ability.       
                 
       

GET HELP WITH THIS ASSIGNMENT TODAY

Clicking on this button will take you to our custom assignment page. Here you can fill out all the additional details for this particular paper (grading rubric, academic style, number of sources etc), after which your paper will get assigned to a course-specific writer. If you have any issues/concerns, please don’t hesitate to contact our live support team or email us right away.

How It Works        |        About Us       |       Contact Us

© 2018 | Intelli Essays Homework Service®

Back To Top