Question: Drug manufacturing is a risky business requiring much research and
Drug manufacturing is a risky business requiring much research and development. Recently, several drug manufacturers had to make important decisions. Developing a new drug for Alzheimer's can cost $250 million. An analyst believes that such a drug would be approved by the FDA with probability 0.70. In this case, the company could make $850 million over the next few years. If the FDA did not approve the new drug, it could still be sold overseas, and the company could make $200 million over the same number of years. Construct a decision tree and recommend a decision on whether to develop the new drug.
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