Profit of simultaneously pursuing both programs

Assignment Help Business Economics

Reference no: EM138872

Q. As CEO of firm A, you and your management team face the decision of whether to undertake a $200 million R&D effort to create a new mega medicine. Your research scientists estimate that there is a 40 percent chance of successfully creating the drug. Success means securing a worldwide patent worth $550 million (implying a net profit of $350 million). However, firm B (your main rival) has just announced that it is spending $150 million to pursue development of the same medicine (by a scientific method completely independent of yours). You judge that B's chance of success is 30 percent. Furthermore, if both firms are successful, they will split equally the available worldwide profits ($275 million each) based on separate patents.

Suppose that firm A and firm B can form a joint venture to pursue either or both of their R&D programs. What is the expected profit of simultaneously pursuing both programs?

Reference no: EM138872

Questions Cloud

Desired proportions of capital and labor : Decrease will have on the desired proportions of capital and labor used in producing the given level of output at minimum total cost.

Distribution of income are associated with trade : What is wrong with claiming that changes in the distribution of income are associated with trade instead of the technological changes that the article discusses.

Determine the minimum average cost : Determine the minimum average cost of the firm with these different order sizes.

Effective check on government action : Explain whether or not you believe modern media is an effective check on government action.

Profit of simultaneously pursuing both programs : What is the expected profit of simultaneously pursuing both programs.

Orporations and governments borrow : Illustrate a form of financial instruments through which corporations and governments borrow money from financial investors and promise to repay with interest.

Effect on the marketplace : Illustrate the effect on the marketplace for a hr. of babysitting services 30 yrs into the future when children born today.

Highest cost of migration : What is the highest cost of migration that a worker is willing to incur and still make the move

Affect household spending on goods and services : Illustrate how do you think this would affect household spending on goods and services.

User Account

All Pages