Krishana Reddy was the head of pharmaceutical company that was trying to develop a new product. Reddy, along with his friend Prabhakar Rao, assessed that such products had mixed success, Reddy and Rao realised that if a new product (a drug)was a success/it may result in sales of 100 crore but if it is unsuccessful, the sale may be only 20 crore. They further assessed that a new drug was likely to be successful 50% of times. Cost of launching the new drug was likely to be 50 crore. Now, Reddy and Rao were in a quandary whether the company should go ahead and market the drug. They contacted Raj, a common friend for advice. Raj was of the opinion that given the risky nature of launch, it may be a better idea to test the market. Rao and Reddy realised test marketing would cost 10 crore. Raj told them the previous test meeting results have been unfavourable 70% of times and success rate of products favourably tested was 80%. Further, when marketing results were unfavourable; the products have been successful 30% of the times. If Rao and Reddy decided to launch the product despite unfavourable test marketing, how much profit/loss can the company expect to earn?
(a)	13.2 crore profit	(b)	36.8 crore profit
(c)	46.8 crore loss	(d)	16 crore loss

Question ID - 53354 | SaraNextGen Top Answer

Krishana Reddy was the head of pharmaceutical company that was trying to develop a new product. Reddy, along with his friend Prabhakar Rao, assessed that such products had mixed success, Reddy and Rao realised that if a new product (a drug)was a success/it may result in sales of 100 crore but if it is unsuccessful, the sale may be only 20 crore. They further assessed that a new drug was likely to be successful 50% of times. Cost of launching the new drug was likely to be 50 crore. Now, Reddy and Rao were in a quandary whether the company should go ahead and market the drug. They contacted Raj, a common friend for advice. Raj was of the opinion that given the risky nature of launch, it may be a better idea to test the market. Rao and Reddy realised test marketing would cost 10 crore. Raj told them the previous test meeting results have been unfavourable 70% of times and success rate of products favourably tested was 80%. Further, when marketing results were unfavourable; the products have been successful 30% of the times. If Rao and Reddy decided to launch the product despite unfavourable test marketing, how much profit/loss can the company expect to earn?
(a)	13.2 crore profit	(b)	36.8 crore profit
(c)	46.8 crore loss	(d)	16 crore loss