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.
Compare the results for 1 and 2, and debate if testing improves the company’s decision-making ability.
Why Choose Us
Top quality papers
We always make sure that writers follow all your instructions precisely. You can choose your academic level: high school, college/university or professional, and we will assign a writer who has a respective degree.
Professional academic writers
We have hired a team of professional writers experienced in academic and business writing. Most of them are native speakers and PhD holders able to take care of any assignment you need help with.
If you feel that we missed something, send the order for a free revision. You will have 10 days to send the order for revision after you receive the final paper. You can either do it on your own after signing in to your personal account or by contacting our support.
All papers are always delivered on time. In case we need more time to master your paper, we may contact you regarding the deadline extension. In case you cannot provide us with more time, a 100% refund is guaranteed.
Original & confidential
We use several checkers to make sure that all papers you receive are plagiarism-free. Our editors carefully go through all in-text citations. We also promise full confidentiality in all our services.
24/7 Customer Support
Our support agents are available 24 hours a day 7 days a week and committed to providing you with the best customer experience. Get in touch whenever you need any assistance.
Try it now!
How it works?
Follow these simple steps to get your paper done
Place your order
Fill in the order form and provide all details of your assignment.
Proceed with the payment
Choose the payment system that suits you most.
Receive the final file
Once your paper is ready, we will email it to you.
No need to work on your paper at night. Sleep tight, we will cover your back. We offer all kinds of writing services.
You are welcome to choose your academic level and the type of your paper. Our academic experts will gladly help you with essays, case studies, research papers and other assignments.
Admission help & business writing
You can be positive that we will be here 24/7 to help you get accepted to the Master’s program at the TOP-universities or help you get a well-paid position.
Editing your paper
Our academic writers and editors will help you submit a well-structured and organized paper just on time. We will ensure that your final paper is of the highest quality and absolutely free of mistakes.
Revising your paper
Our academic writers and editors will help you with unlimited number of revisions in case you need any customization of your academic papers