Show the dynamic decision making case study

Assignment Help Business Management

Reference no: EM1342757

Dynamic Decision Making Case Study

A pharmaceutical company is in the process of developing a new drug. The development is planned in two stages. The first stage costs one million dollars, and the second stage costs two million dollars. If the development is successful it will result in revenues of five million dollars. All dollars are in present value, and discounting is not necessary. The chance of successful development is 72%. If the development effort is a failure, there would be no revenue, and all the investment will be a loss. The company has the option not to develop the new drug.

Draw a decision tree to model this problem. Solve the problem by rolling back the tree.

The company has the option of conducting a test at the end of the first phase, at a cost of $250,000. There is an 80% chance that the drug passes the test, and a 20% chance that the drug fails the test. If the drug passes the test there is a 90% chance that it will be a success and a 10% chance it will be a failure. Draw a decision tree including the test option. Solve the decision tree by rolling back the tree.

Reference no: EM1342757

Questions Cloud

Small business management - franchises : How would you find out if a potential product or service would have demand for it and what would you like or dislike about being a franchisee?

Effective decision making : Effective decision making - How can a manager or a leader be effective in his actions and decision making?

Differences between cash flow and profit : What are the differences between a business plan, a budget and company policies and what are the differences between Cash Flow and Profit?

Rational decision making model-improving decisions : Rational Decision Making Model - Improving Decisions that decision in terms of the rational decision making model. How could you have improved your decision?

Show the dynamic decision making case study : Dynamic Decision Making Case Study - Show a decision tree to model this problem. Solve the problem by rolling back the tree.

Dynamic decision making in betting : Dynamic decision making in betting - basketball player is averaging 25 points per game over the season.

Consumer decision-making - social influence : Consumer Decision-Making: Social Influence - select one of the social influences that affects consumer decision-making

Dynamic decision making with space shuttle challenger : Dynamic Decision Making with Space Shuttle Challenger - analyze the decision-making process prior to the launch.

Show the decision making and problem solving techniques : Decision Making and Problem Solving Techniques - Show some techniques managers use for decision making and problem solving. Use Toyota or Ford as an example.

User Account

All Pages