Case 4 - R&D project A particular company is considering a $7 million research and development (R&D) project. Profit projections appear promising, but the president of the company is concerned because the probability that the R&D project will be successful is only 0.50. Secondly, the president knows that even if the project is successful, it will require that the company build a new production facility at a cost of $20 million in order to manufacture the product. If the facility is built, uncertainty remains about the demand and thus uncertainty about the profit that will be realized. Another option is that if the R&D project is successful, the company could sell the rights to the product for an estimated $27 million. Under this option, the company would not build the $20 million production facility. Consider the decision tree. Profit ($ millions) High Demand 38 0.5 Building Facility Medium Demand 20 {520 millign) 0.3 Low Demand 10 Successful P Start R&D Project Sell Rights {57 million) 20 Mot Successful = Do Mot Start R&D Project The profit projection for each outcome is shown at the end of the branches. For example, the revenue projection for the high-demand outcome is $65 million. However, the cost of the R&D project ($7 million) and the cost of the production facility ($20 million) show the profit of this outcome to be $65 - $7 - $20 = $38 miillion. Branch probabilities are also shown for the chance events. Questions What must the minimum selling price (in millions of dollars) be for the company to consider selling the rights to the product? (Round your answers to the nearest integer.) At node 3, profit for sell rights would have to be $ million dollars or more. To recover the $ million dollars R&D cost, the selling price would have to be % million dollars or more