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 SHDs project director you are concerned with 2 principal issues.

First, should you pursue the commercial development of Compound X?

Second, if you do pursue development, what value should you place on the project when comparing it to competing projects and why? Perform a sensitivity analysis on your results. Provide present value analyses and estimated probability calculations as needed.