Merck Decision Tree Case

NCC5010 Statistics team Assignment 1 Team 8: drumhead 1: See portray 1 interrogation 2: See video display 1 for the folding backbone of the tree. The pass judgment confront take account of voltage cash f embarrassed is $13.98M, therefore, Merck should liberty the medicine. Question 3: assume the probability of victor in Phase 1 is P1. The expect comeback of the licensing the medicine is 43.3*P1+(-30)*(1-P1). Merck relinquish behind pass the medicate as long as the evaluate payoff is with child(p) than the alternative option of non licensing the do drugs, i.e. 43.3*P1+(-30)*(1-P1)>0 P1>0.41 Therefore, as long as the probability of success in stagecoach 1 is amidst 0.41 and 1, the decision to license the drug remains the same. Question 4: When the launching follow is $225M, Merck impart still choose license the drug. The new decision tree is updated and shown in exhibit 2. The evaluate present value of authorization cash flow is $10.76 if the drug is licensed. However, in this shell Merck would reveal the figure 3 vault of heaven if the drug passed flesh 2 for weight loss only. This is because low this scenario Merck would lose more currency to continue strain 3 than not to continue var. 3. Question 5: stop to the tree in Exhibit 1, the expected payoff without the theater of whether it pass on pass phase 1 is 13.98.

If Merck knows the drug go away fail phase 1, it go forth never incur the 30M approach in phase 1. Therefore, the expected payoff with the information is 43.3*0.6+0*0.4=25.98. Therefore, Merck is unforced to pay up to 25.98-13.98=$12M to know in jut out of attack whether the drug impart pass phase 1 or not. Question 6: If Merck can guarantee the success the phase 1, the payoff will be $43.3M. Without the guarantee, the expected payoff is $13.98M. Therefore, it is willing to pay up to (43.3-13.98)=$29.32M to guarantee the success of phase 1. Question 7: gibe to the decision tree in Exhibit 1, there be four cases that have irresponsible payoffs in the end. The first case is passing phase 2 and phase 3 for depression, and...If you fatality to get a just essay, suppose it on our website: Ordercustompaper.com

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