Question
A pharmaceutical company is considering investing in the development of a new drug. The company has estimated that the total cost of the project will
A pharmaceutical company is considering investing in the development of a new drug. The company has estimated that the total cost of the project will be $5 million and the drug will generate revenues of $12 million if it is successful. However, there is a risk that the drug may not be successful and the project will fail. The company estimates that there is a 30% chance that the project will fail and generate no revenue. What is the expected value, standard deviation, and coefficient of variation for this project? Should the company invest in this project?
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The detailed answer for the above question is provided below Given data Total cost of the project C 5 million Revenues if the drug is successful R 12 ...Get Instant Access to Expert-Tailored Solutions
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Microeconomics
Authors: Dean Karlan, Jonathan Morduch
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