BMAC, a research and development (R & D) company, must decide whether to spend $2million to continue with a particular drug development research project. The success of theproject (as measured by obtaining a patent) is not assured, and at this point thedecisionmaker judges only a 65% chance of getting the patent. If the patent is awarded, thecompany can either license the patent for an estimated $25 million or invest an additional$10 million to create a production and marketing system to sell the product directly. If thecompany chooses the latter, it faces uncertainty of demand (categorized as high, medium orlow demand) and associated profit from sales. The probabilities of the three levels ofdemand and associated revenues are summarised on the Table below.Probability Revenue ($M)Demand High 0.2 50Demand Medium 0.5 35Demand Low 0.3 151

Revisit the BMAC research & development (R & D) decision case study above and continueyour analysis by addressing the following questions (approximately 500 words, excludingfigures, excel spreadsheets and references).1. Using your decision tree (from assignment 2) and the folding back the tree procedure,calculate the expected monetary value (EMV) of the two options at the root of theBMACs decision problem i.e. (A) Continue with the R &D project at a cost of $ 2Million or (B) Stop R & D project at no cost. Which alternative or strategy shouldBMAC pursue in order to maximize their revenues?