Question: A new drug your company is developing will fail with probability of 0.85 and succeed with probability 0.15. If it is successful, your company will

A new drug your company is developing will fail with probability of 0.85 and succeed with probability 0.15. If it is successful, your company will earn $2 billion in revenues from the drug. The drug will cost $800 million to develop. Should your company take on the development of this new drug? Show your calculations

a) No, because the expected new benefit is 500

b) Yes, because the expected net benefit is 600

c) No, because the expected net benefit is -500

d) Yes, because the revenues exceed the costs.

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