Answered step by step
Verified Expert Solution
Question
1 Approved Answer
1. Research & Development. Jackson Pharmaceuticals Inc. is considering funding a research team to cure Lyme's disease. Bill Mackenzie, executive VP of research, must ultimately
1. Research & Development. Jackson Pharmaceuticals Inc. is considering funding a research team to cure Lyme's disease. Bill Mackenzie, executive VP of research, must ultimately make this decision. The research program has a total price tag of $10M (million), and there is no guarantee that it will be successful. In fact, Bill estimates only a 40% chance that they will find a cure. If the research team finds a cure, Jackson Pharmaceuticals must then decide whether they wish to produce the drug themselves or sell the license to a chemical lab for $40M revenue. If they produce the product themselves and production goes smoothly, they forecast a revenue of $60M. However, refitting one of their production facilities is not without risk. There is a 30% chance of production troubles, in which case they would earn only $20M revenue. +- What should Bill McKenzie do? (Result: Expected Monetary Value or payoff from a successful R&I project -S9.2 M) *-' How do you think the probability, cost, and revenue information used in this analysis were obtained? + 2. Should Pharma C, Inc. invest in product development of Compound X? If a cure can be developed for Some Horrible Disease (SHD), it would be beneficial to humankind and yield a profit of $500M. Our initial research indicates a 25% chance that a Compound X will be effective against SHD. However, confirmation of efficacy will require an additional $25M investment in R&D. Furthermore, even if Compound X is proven effective, an additional $25M will be required for the clinical trials required to get it approved for human use. It is estimated that there is a 40% chance that these trials will reveal serious side effects and approval will be denied.*- As SHD's project director you are concerned with 2 principal issues. First, should you pursue th
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started