Compute the expected profit, Financial Management

A drug company has developed a new painkiller for chronic pains, although it is doubtful whether the new drug actually has any effect. The company conducts a double-blind experiment with n = 298 randomly chosen chronic pain patients over a 6 months period. All patients receive the drug for 3 consecutive months and the placebo for 3 consecutive months, but the order of the drug/placebo treatment is unknown to them and to the administering doctor. During the two 3 months periods, patients report their level of pain on a scale from 0 to 10 (higher numbers indicate more pain). For each patient, let di be the difference in the level of pain between the placebo treatment period and the drug treatment period (such that positive values of di indicate that the patient felt better while taking the drug).

(a) The outcome of the trial is such that  1567_Compute the expected profit.png  2:9 Will the company get the drug approved by the FDA based on this study, using a two sided hypothesis test?

(b) Suppose getting the drug approved yields profits of $600 million, while conducting a study as described above costs $10 million.

(b1) If the drug company knows that the new drug has no effect, would it still make sense for the company to conduct a study in the hope of finding an effect at the 5% significance level? Compute the expected profit of such a strategy.

Posted Date: 3/9/2013 2:57:51 AM | Location : United States







Related Discussions:- Compute the expected profit, Assignment Help, Ask Question on Compute the expected profit, Get Answer, Expert's Help, Compute the expected profit Discussions

Write discussion on Compute the expected profit
Your posts are moderated
Related Questions
Step by step approach to completing a statement of cash flows Step by step approach to completing a statement of cash flows Step 1

After determining the expected cash flows and appropriate interest rate, the last step in the valuation process is to find the total PV of all cash flows. The PV

what is the applicability of the operating cycle in a vegetaion farm in Uganda

Question 1: a) Describe fully why and how government intervenes in the foreign exchange market. b) "Changes in the equilibrium exchange rate between a pair of currencies rel

A cash-flow yield is the discount rate that makes the price of a mortgage-backed or asset-backed security equal to the present value of its ca

evaluate the importance of leverage in a small scale company

Q. Calculate Average Annual Return? An investor buys a bond in 1978 maturity in 1980 at Rs.900. It has a maturity value of 10 years and par value of Rs. 1000. It fetches RS.90

Q. What do you mean by Present Value of a Future Sum? The present value of a future sum will be worth less than the future sum because one foregoes the opportunity to invest an

Advantages of Floating rate notes: We know that the coupon rate is fixed for fixed rate bonds and that throughout its tenure the investor receives coupons at a predetermined in

TYPES OF DIVIDEND POLICY 1. Regular dividend policy: Payment of dividend at standard rate is known as regular dividend policy. 2. Stable dividend policy: Payment of fix