Kim A pharmaceutical company is in the process of developing anew drug. The deve

Kim A pharmaceutical company is in the process of developing anew drug. The development is planned in two stages. The first stagecosts one million dollars and the second stage costs two milliondollars. If the development is successful it will result inrevenues of five million dollars. All dollars are in present valueand discounting is not necessary. The chance of successfuldevelopment is 72%. If the development effort is a failure therewould be no revenue and all the investment will be a loss. Thecompany has the option not to develop the new drug. Draw a decisiontree to model this problem. Solve the problem by rolling back thetree.