Use the Table Below to Answer the Following Questions) -Which of the Following Is the Root Cause for the Pharmaceuticals

question 5

Multiple Choice

Use the table below to answer the following questions) .
Dresden Pharmaceuticals has decided to go ahead and start clinical trials on a potential new drug. The total R&D costs are estimated to reach around $875,000,000 with clinical trials mounting to
$145,000,000. The current market size is estimated to be around 3,000,000 and is expected to grow at 4 percent every year. The market share Dresden hopes to capture in the first year is 7 percent, and is projected to grow by 25 percent each year for the next 4 years. A monthly
prescription is anticipated to generate revenue of $420 while incurring variable costs of $150. A discount rate of 8 percent is assumed. $$\begin{array} { | l | l | } \hline \text { Dresden Pharmaceuticals } & \\\hline & \\\hline \text { Data } & \\\hline & \\\hline \text { Market Size } & 3,000,000 \\\hline \text { Unit monthly Rx) revenue \$) } & 420 \\\hline \text { Unit monthly Rx) cast \$) } & 150 \\\hline \text { Discount Rate per cent) } & 8 \\\hline & \\\hline \text { Project Costs } & \\\hline \text { R\&D \$) } & 875,000,000 \\\hline \text { Clinical Trials \$) } & 145,000,000 \\\hline & \\\hline\end{array}$$
-Which of the following is the root cause for the newsvendor problem?

• A) uncertainty in supply
• B) uncertainty in demand
• C) high cost per unit sale
• D) high total production cost

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Definitions:

Normally Distributed

Describes a symmetric, bell-shaped distribution of data where the mean, median, and mode are equal, prevalent in many natural phenomena.

Coefficient of Determination

A statistical measure that explains the proportion of the variance for a dependent variable that's explained by an independent variable or variables in a regression model.

Sum of Squares

A statistical measure of the dispersion of observation values, calculated as the sum of the squared differences from the mean.

Regression Coefficient

A value that represents the degree of change of a dependent variable expected from a one-unit change in an independent variable, all else being equal.