BUS9040M: Decision Analysis for Managers Assignment 4: Case Study Analysis - BMAC Research & Development Decision Note:

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BUS9040M: Decision Analysis for Managers
Assignment 4: Case Study Analysis - BMAC Research &
Development Decision
Note: Please do make sure that you appropriately
cite any reference material, using Harvard Referencing style and
ensure that you draw from quality academic sources. On this note,
remember that general internet sources such as Wikipedia and
Investopedia are not recognised academic sources.
In this assignment, you will continue with the analysis of the
BMAC research & development (R & D) case study from
assignment 3. For ease of reference, a copy of the case study is
provided in the box below.
Case study: BMAC Research & Development
decision
BMAC, a research and development (R & D) company, must
decide whether to spend $2 million to continue with a particular
drug development research project. The success of the project (as
measured by obtaining a patent) is not assured, and at this point
the decision-maker judges only a 65% chance of getting the patent.
If the patent is awarded, the company can either license the patent
for an estimated $25 million or invest an additional $10 million to
create a production and marketing system to sell the product
directly. If the company chooses the latter, it faces uncertainty
of demand (categorized as high, medium or low demand) and
associated profit from sales. The probabilities of the three levels
of demand and associated revenues are summarised on the Table
below.
Probability
Revenue ($M)
Demand High
0.2
55
Demand Medium
0.5
33
Demand Low
0.3
15
Revisit the BMAC research & development (R & D) decision
case study above and continue your analysis by addressing the
following questions (approximately 300 - 500 words, excluding
figures, excel spreadsheets and references).