Use the Information Below to Answer the Following Questions)

question 17

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 coefficiIIt of variation obtained from the simulation results? [Hint: Choose the approximate value.]

• A) 1.587
• B) 1.122
• C) 2.015
• D) 1.890

Understand the impacts of financial decisions on cash flow.

Interpret various financial ratios and their implications.

Compare financial metrics historically, with competition, and against budgets.

Analyze the impact of market perceptions on financial health through market value ratios.

---

Definitions:

Quantification

The process of expressing or measuring something in terms of numbers or units.

Mnemonic CLIENTS

A memory aid used to encapsulate information for easier recall, specific content represented by "CLIENTS" is not defined universally.

Impairment

A reduction in the ability or function in a specific area, often as a result of a condition or injury.

Stressor

An event, situation, or stimulus that causes stress or tension in an individual.