Q1) Draw a decision tree for this problem. Your tree should include probabilities associated with chance nodes and payoffs associated with terminal nodes. : Please refer to the following decision tree. ( “Net cash flow = income PV-launching cost- trial cost”)

[Exhibit1]

Q2) Fold back the tree. Assuming Merck is risk neutral, should it license Davanrik? : Yes, Merck should do, since Merck is expected to earn $13.98M by licensing Davanrik.

Q3) For what range of values of “probability of success of Phase 1” would your answer to Question 2 remain the same? : To keep the decision in Q2 the same, the probability of success of Phase I should be not less than 40.93%. The calculation is as below. Assuming that the probabilities of Phase II and III are the same, the expected value of licensing can be calculated as below. If x is probability of success of Phase I, Expected value = 43.3x -30(1-x) If 43.3x -30(1-x) =0, x = 0.4093. 40.93%

Q4) How would your answer to Question 2 change if the costs of launching Davanrik for weight loss were $225 million instead of $100 million as given in the case? : Merck should license Davanrik, since its expected earning is still positive. (Please refer to the following exhibit 2.)

[Exhibit 2]

Q5) How much would Merck be willing to pay to guarantee that Phase I of the FDA approval process is successful? : If Merck can guarantee that the Phase 1 of the FDA approval process is successful, the expected value of licensing increases to $43.3M, while the current expected value is $13.98M, as you can see in Exhibit 1. In this manner, Merck would like to pay up to $29.32M(43.3M-13.98M) to guarantee.

...Trajico, Maria Liticia D.
BSEd III-A2
REFLECTION
The first thing that puffs in my mind when I heard the word STATISTIC is that it was a very hard subject because it is another branch of mathematics that will make my head or brain bleed of thinking of how I will handle it. I have learned that statistic is a branch of mathematics concerned with the study of information that is expressed in numbers, for example information about the number of times...

...Case One:
Valley Winery
Valley Winery, a favorable wine company, hired Pat Waller as their sales manager of the San Francisco region’s chain division. Although the company has had increasing sales for the past several years, Valley Winery has its fair share of problems that have Waller worried. He is very aware of the competitiveness within the wine industry and is concerned that Valley Winery will not be able to...

...Baur Bektemirov
BUSF 36106: Assignment 5
Freemark Abbey Winery
Assume that under no unusual circumstances (no storm), Jaeger sells 1,000 cases of Riesling. Consider diﬀerent cases: 1. Jaeger harvests grapes in anticipations of storm. Then the total revenue will be equal to 12×1000×$2.85 = $34200. 2. Jaeger doesn’t harvest and there is no storm with 50% chance. 2.1. With 40% chance, sugar concentration is 25%, then the total revenue is 12 × 1000...

...-------------------------------------------------
The Valley Winery
-------------------------------------------------
Case Analysis
By: Paul Welge
Dr. Bob McDonald
MKT 4359
Section 1
Valley Winery was founded in 1933 after the prohibition and has grown to be the largest domestic producer of wine in the United States. The brand has multiple product lines that include both low-price, consistent-quality wines and also low-grade wines and wine...

...The Valley Winery is one of the nations largest privately help companies, and the top domestic producer of wine selling more than 40 percent of all wine produced in the United States. Valleys success is largely due to their high quality wine sold for a lower price, and a very aggressive and innovative sales force. Sales groups are separated into three main categories:
1) Liquor stores and bars
2) Restaurants, resorts, hotels, and motels
3) Chain Division
The company has...

...analysis, other decision making techniques are discussed. These techniques
include decision analysis, project scheduling and network models.
Chapter 1 illustrates a number of ways to summarise the information in data sets, also known as
descriptive statistics. It includes graphical and tabular summaries, as well as summary measures
such as means, medians and standard deviations.
Uncertainty is a key aspect of most business problems. To deal with uncertainty, we need a basic...

...The Valley Winery-Case 1.1
Is the management of Valley Winery doing an acceptable job of hiring and training qualified employees?
Management is the foundation of a company. They are the ones that make decisions which could make or break a company. They personify how the company and employees should act. If one is driven towards perfection in sales, many other important areas of the business could be overlooked. For example, maintenance of...

...Question 2b 6
Question 2c 7
Question 3a 8
Question 3b 8
Question 3c 10
Question 3d 11
Question 4 12
Question 5 14
References 15
Question 1
The sampling method that Mr. Kwok is using is Stratified Random Sampling Method. In this case study, Mr Kwok collected a random sample of 1000 flights and proportions of three routes in the sample. He divides them into different sub-groups such as satisfaction, refreshments and departure time and then selects...

2907 Words |
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