Use the Information Below to Answer the Following Questions)

question 7

Multiple Choice

Use the information below to answer the following questions) . Below is a decision tree illustrating the R&D process for a new drug. Let us assume that if market is large, payoff is lognormally distributed with a mean of $4,900 million and a standard deviation of $1,000 million; if market is medium, payoff is lognormally distributed with a mean of $2,500 million and a standard deviation of $500 million; and if market is small, payoff is normally distributed with a mean of $1,800 million and standard deviation of
$200 million. Let us also assume that the cost of clinical trials is uncertain and estimates are modeled with a triangular distribution with a minimum of -$700 million, a most likely value of -
$550 million, and a maximum of -$500 million. Use 10,000 trials and a random seed of 1.
-What is the mean absolute deviation obtained from the simulation results? [Hint: Choose the approximate value.]

• A) $ 119.0
• B) $ 116.1
• C) $ 105.7
• D) $ 94.0

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Definitions:

Deceased Partner

A Deceased Partner is a member of a partnership who has passed away, raising considerations regarding the continuation or dissolution of the business under partnership laws.

Majority Vote

A decision-making process where more than half of the votes cast by members eligible to vote are needed to pass a resolution or make a decision.

Unanimous Vote

A voting result in which all participants agree and vote the same way on a particular issue or election, showing total agreement.

Proceeds

Whatever is received on the sale, exchange, collection, or other disposition of collateral.