A Pharmaceutical Company Has Determined That If a New Cholesterol-Reducing

question 31

Essay

A pharmaceutical company has determined that if a new cholesterol-reducing drug is manufactured (introduced to the market),the following probability distribution will describe this drug's contribution to the company's profits during the next six months.
$$\begin{array} { c c } \text { Profit Contribution } & \text { Probability of profit contribution } \\- \$ 30,000 & .20 \\\$ 50,000 & .50 \\\$ 200,000 & .30\end{array}$$
The company management has decided to market this product if the expected contribution to profit for the next six months is more than $90,000.Based on the information given above,should the company begin manufacturing the new drug?

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Definitions:

Contributed Capital

The amount of money that shareholders have invested in a company through the purchase of its stock.

Retained Earnings

The portion of net earnings not distributed as dividends but retained by the company to reinvest in its core business or to pay debt.

Stock Dividends

Dividends paid to shareholders in the form of additional shares of stock instead of cash.

Contributed Capital

The total value of the cash and other assets received by a company from its shareholders in exchange for stock, also known as paid-in capital.