Use the Information for the Question(s) Below

question 60

Multiple Choice

Use the information for the question(s) below.
Big Cure and Little Cure are both pharmaceutical companies. Big Cure presently has a potential "blockbuster" drug before the Food and Drug Administration (FDA) waiting for approval. If approved, Big Cure's blockbuster drug will produce $1 billion in net income for Big Cure. Little Cure has 10 separate less important drugs before the FDA waiting for approval. If approved, each of Little Cure's drugs would produce $100 million in net income for Little Cure. The probability of the FDA approving a drug is 50%.
-What is the expected payoff for Big Cure's blockbuster drug?

• A) $100 million
• B) $0
• C) $1 billion
• D) $500 million

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Definitions:

Shareholders

Individuals or entities that own shares in a corporation, giving them partial ownership of the company and usually rights to dividends and voting on corporate matters.

HMOs

Health Maintenance Organizations; a type of health insurance plan that provides healthcare services to members through a network of doctors, hospitals, and other healthcare providers.

Americans

Residents or citizens of the United States, although the term can also broadly refer to people from the American continent.

HMOs

Health Maintenance Organizations, a type of health insurance plan that provides a wide range of healthcare services through a network of providers for a fixed annual fee.