Complete the decision tree problem

Assignment Help Operation Management

Reference no: EM131414826

Complete the following decision tree problem. You have been hired as an operations analyst for a start-up company. The company has a new drug that will greatly reduce the risk of heart disease, but requires FDA approval before it can be sold. The administrative costs to manage the FDA approval process are $200,000, while if the company chooses to forgo the application, it can sell the patent for the unapproved product for $50,000. The company’s regulatory expert estimates the probability of FDA approval at 80%. If the product is approved by the FDA, the company can sell the patent immediately for $500,000 or it can choose to market the product. If it chooses to market the product, it faces an uncertainty regarding Obama’s healthcare initiative. If Obama’s healthcare initiative is successful at reducing chronic disease through preventative care, then the profits for the drug will be $100,000. If the initiative is not successful, then the company’s profits will be $1,000,000. The probability of the initiative being successful is estimated at 25%. Your answer should include the tree diagram, nodes, probability labels, and a recommendation of what the company should do using EMV as the decision method.

Reference no: EM131414826

Questions Cloud

Explain how prejudices or stereotypes : Please explain the purpose of an information system and describe how information systems may be used to support an organization and enhance productivity and decision making. Explain how prejudices or stereotypes can lead to discrimination in the work..

Leading up to the introduction of the innovation diamond : Recall the five examples leading up to the introduction of The Innovation Diamond. Can you spot any of the vectors outlined in these examples? Find a 6th company that had an innovative idea. Using what you know from this week’s lecture – focusing on ..

How does career planning differ from training : How does Career Planning differ from Training? How does it focus on the individual workers' and the organization's future needs as opposed to the needs for competence in a worker's current job? If an organization does not value structured and properl..

Characteristic of todays business environment : Characteristics of a good negotiator include each of the following characteristics except. Which of the following is not a characteristic of today's business environment?

Complete the decision tree problem : Complete the following decision tree problem. You have been hired as an operations analyst for a start-up company. The company has a new drug that will greatly reduce the risk of heart disease, but requires FDA approval before it can be sold. If the ..

Contrast the two forecasting techniques approaches : In general, compare and contrast the two forecasting techniques approaches (decomposition and smoothing methods). How are they similar? How are they different? Which do you think would be more readily accepted in practice?

Ownership channel-financing and negotiation channel : Channel members work together in several different channel arrangements such as (1) ownership channel, (2) negotiation channel, (3) financing channel, (4) promotions channel, and (5) logistics channel. Select two and discuss how IT technology (such a..

Usage by influencing cultural rituals : As a cell phone marketer, how might you boost sales and usage by influencing cultural rituals and encouraging the development of cultural rituals? Suggest two scenarios that depict the potential effect(s) of a large deductible on price elasticity for..

When creating trade policy : When creating trade policy, should the interest of businesses and their employees take precedence or should that of consumers take precedence? Explain your answer with a well-constructed and cogent response. Make sure to include two quality sources i..

User Account

All Pages