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Big Cure and Little Cure are both pharmaceutical companies. Big Cure presently has a potential blockbuster drug before the Food and Drug Administration (FDA) waiting
Big Cure and Little Cure are both pharmaceutical companies. Big Cure presently has a potential "blockbuster" drug before the Food and Drug Administration (FDA) waiting for approval. If approved, Big Cure's blockbuster drug will produce $1 billion in net income for Big Cure. Little Cure has 10 separate less important drugs before the FDA waiting for approval. If approved, each of Little Cure's drugs would produce $100 million in net income for Little Cure. The probability of the FDA approving a drug is 50%. What is the expected payoff for Little Cure's ten drugs? A. $500 Million B. $100 Million C. $1 Billion D. $0 E. $250 Million F. None of the above
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