You are performing scenario analysis on Exact Sciences Corp. (NASDAQ: EXAS). You know the Food and Drug Administration's (FDA) Advisory Committee will release their report soon, which provides a recommendation as to whether the company's new colon cancer diagnostics test, Cologuard, should be approved by the FDA. You estimate that there is an 85% chance the report will be very positive, and that the one-year return associated with this outcome will be +110%. You estimate there is a 10% chance that the report will be mixed, and that the one-year return associated with this outcome will be -10%. Finally, you estimate that there is a 5% chance that the report will be very negative, and that the one-year return associated with this outcome will be -60%. Based on your estimates, what is the one-year expected return of EXAS? (Hint: use the formula for expected return)

Answer rating: 100% (QA)

To calculate the oneyear expected return of EXAS we can use the formula for expected return which ... View the full answer