Use the Information Below to Answer the Following Question(s)

question 50

Multiple Choice

Use the information below to answer the following question(s) .
Below is a decision tree illustrating the R&D process for a new drug.

Let us assume that if the market is large, the payoff is lognormally distributed with a mean of $ 4,900 million and a standard deviation of $ 1,000 million; if the market is medium, the payoff is lognormally distributed with a mean of $2,500 million and a standard deviation of $500 million; and if the market is small, the payoff is normally distributed with a mean of $1,800 million and standard deviation of $200 million.

-What is the value of mean obtained from the simulation results? [Hint: Choose the approximate value.]

• A)$ 119.0
• B)$ 116.1
• C)$ 105.7
• D)$ 94.4

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Definitions:

Compound Leverage Ratio

The measure of the level of leverage in a company's capital structure, combining both debt and equity, and its potential effects on the company's returns.

Operating ROA

Operating Return on Assets is a financial metric that measures how efficiently a company can manage its assets to generate earnings.

Debt Percentage

Debt percentage typically refers to the proportion of a company's total capital that is financed through debt, indicating its leverage level.

Cash Flow Data

Information pertaining to the amounts of inflows and outflows of cash for a business or investment.