lt; Gmail .ll 21:07 CO 44% cengage.vitalsource.com Chapter 3: Decision Analysis /Drugs/). Developing new drugs that safely address particular...

I don't know how to do the decision tree portion. If you would that would be a tremendous help.

< Gmail .ll21:07CO 44%cengage.vitalsource.comChapter 3: Decision Analysis/Drugs/). Developing new drugs that safely address particular medical issues withoutproducing unpleasant or dangerous side effects is a very long and expensive process,often taking 10-15 years of work and costing an average of $4 billion. The long lead-time for brining drugs to market is mostly due to required clinical trials. Thus, drugmanufacturers have to make very important, high-stakes decisions when they considerwhether or not to place a new drug into the clinical trials process.Suppose scientists at Prezcott Pharma have discovered a potential drug break-through for the treatment of Alzheimer's disease, and corporate executives now needto decide whether to go forward to conduct clinical trials and seek FDA approval tomarket the drug. The company has spent $295 million to date in research expenses.The cost of clinical trials is expected to be $145 million, and the probability of a suc-cessful outcome with only minor side effects is 0.15 whereas the probability of a suc-cessful outcome with major side effects is 0.2. After the clinical trials are completed,the company may seek approval from the Food and Drug Administration (FDA) at anestimated cost of $25 million. If the clinical trials suggested the drug produced onlyminor side effects, the chance of FDA approval is 0.6. Alternatively, the chance of gain-ing FDA approval if the drug has major side effects is 0.35. The market potential forthe drug has been estimated as large, medium, or small, with the following probabili-ties and characteristics:Minor Side EffectsMajor Side EffectsRevenueProbabilityRevenueProbabilityLarge$ 4,20055%$ 2,30035%Medium$ 2,15035%$ 1,40050%Small$ 1,50010%$ 85015%(Revenue is expressed in millions of dollars.)If Prezcott cannot secure FDA approval, it can still try to sell the drug to an international company known to seek drugs that have successfully completed clinical trials bufailed to get FDA approval. A business analyst at Prezcott estimates that if the drug failsto secure FDA approval, there is a 50% chance that the company can sell the drug for$500 million if the clinical trials reported minor side effects and a 30% chance the com-pany could get $200 million for the drug if the clinical trials reported major side effects.1. Develop a decision tree to determine the best course of action recommended by theEMV criterion.2. Which sequence of decisions may lead to the worst outcome?3. What is your recommended sequence of decisions and why?CASE 14.2Hang On or Give Up?Success or failure as a farmer depends in large part of the uncertainties of thenews article:weather during the growing seasons. Consider the following quote from a recent"...In a summer plagued by drought and heat, many Southern crops are wither-ing in the fields, taking farmers' profits down with them. Some farmers are fight-ing to break even. But others have had to give up hope that this year's crop willsurvive to harvest. 'Farmers must decide if they're going to continue to nurturecustom page194AVQ3. . .