A pharmaceutical company is planning to invest $100,000 to develop a new flu medicine. From past experience, they expect that the chance that they will successfully develop the drug is 30% and they will make a revenue of $600,000. They expect that there is a 70% chance they will fail. If they fail then they can invest $100,000 more to develop the drug. This time they expect a 40% chance of successfully developing the drug and making $600,000. (a)Draw a decision tree representing this situation and find the optimal actions and expected profit. (hint: start with a decision node) (b)Suppose the company can conduct some research, which will tell them with certainty if they can develop the drug by an investment of possible $100,000, $200,000 or if they can't develop it. Assuming such research is possible, how much would the compay be willing to pay for it, ie, what is the expected value of perfect information (EVPI) for this problem?

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