The probability that a pharmaceutical firm will successfully develop a new drug that will return \$750 million dollars is 0.14. Of the resear

Question

The probability that a pharmaceutical firm will successfully develop a new drug that will return \$750 million dollars is 0.14. Of the research is unsuccessful, the company incurs a cost of \$100 million dollars. What is the expected return in the long run for continually trying to develop new drugs?

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4 weeks 2021-12-31T02:08:45+00:00 1 Answer 0 views 0

The expected return in the long run for continually trying to develop new drugs is \$19 million dollars.

Step-by-step explanation:

We have these following probabilities for the pharmaceutical firm:

A 14% probability that the research to develop a new drug is successful, earning \$750 million dollars.

An 86% probability that the research to develop a new drug is unsucessful, losing \$100 million dollars.

What is the expected return in the long run for continually trying to develop new drugs?

14% probability of earning \$750 million, 86% probability of losing \$100 million. So

The expected return in the long run for continually trying to develop new drugs is \$19 million dollars.