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Business, 22.12.2021 05:00 kodi07

The Moore Pharmaceutical Company has spent $300 million to date in research expenses for the development of a new drug. The next decision is whether to proceed to clinical trials. The cost of the clinical trials is estimated to be $250 million, and the probability of success is 30%. If the clinical trials are successful and the company chooses to bring the new drug to market, the market potential has been classified as large, medium, or small. There is a 60% probability the market will be large and the company will make a total of $4.5 billion in present value profit over the next 10 years. There is a 30% probability the market will be medium and the company will make a total of $2.2 billion in present value profit over the next 10 years. There is a 10% probability the market will be small and the company will make a total of $1.5 billion in present value profit over the next 10 years. If the clinical trials fail, the company is prohibited by law from bringing the new drug to market.

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