Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Lilly is producing a new drug that will be sold for 10 years. Year 1unit sales are assumed to follow a triangular random variable with
Lilly is producing a new drug that will be sold for 10 years. Year 1unit sales are assumed to follow a triangular random variable with worst case 100,000 units, most likely case 150,000 and best case 170,000 . The year 0 fixed cost of developing the drug is $1.6 billion. Sales are equally likely to increase for 2,3,4,5,6 years, with the average percentage increase during those years following a triangular random variable having worse case 5%, most likely case 8%, and best case 10%. During the remainder of the 10 -year life of the drug, unit sales will decrease at a rate governed by a triangular random variable having best case 8%, most likely case 12% and worst case 18%. During each year, a unit of the drug sells for $15,000. Year 1 variable cost of producing a unit of the drug is $10,000. The unit variable cost of producing the drug increases at rate 4% a year. 1. The cumulative distribution for triangular (a,c,b) is given by F(x)={(ba)(ca)(xa)21(ba)(bc)(bx)2axccxb To generate the triangular distribution, we have X=a+sgrt(Rand()(ca)(ba)) if Rand()
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