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A pharmaceutical company is considering a $10 million investment in the final clinical trials for a new drug. The potential outcomes are: a 20% probability of full approval, yielding a net profit of $50 million; a 50% probability of limited approval, yielding a net profit of $10 million; and a 30% probability of rejection, resulting in the loss of the entire $10 million investment. What is the expected payoff of proceeding with this investment?
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A pharmaceutical company is considering a $10 million investment in the final clinical trials for a new drug. The potential outcomes are: a 20% probability of full approval, yielding a net profit of $50 million; a 50% probability of limited approval, yielding a net profit of $10 million; and a 30% probability of rejection, resulting in the loss of the entire $10 million investment. What is the expected payoff of proceeding with this investment?