A drug development company develops a new antiviral medication. It applies for a patent and for…

A drug development company develops a new antiviral medication. It applies for a patent and for Federal Drug Administration (FDA) approval to sell it. The firm estimates that the patent application has a 40% chance of success and that FDA approval has a probability of 50%. If both applications are successful, the drug can be sold to a major drug producer for $16 million. If FDA approval is obtained but the patent application is unsuccessful, the drug can be sold for $2 million. If the drug is not approved by the FDA, it is worth nothing. What are the expected value and variance of this drug? (Work in units of $1 million.)
Patent success probability: 40%
FDA approval probability: 50%
Value if patent & FDA successful: $16 million
Value if FDA successful but patent unsuccessful: $2 million
Value if FDA unsuccessful: $0 million
Part 2
The expected value (EV) of the medication is EV = enter your response here million. (Enter your response rounded to two decimal places.)
Part 3
The variance of the medication’s value is Variance = enter your response here million. (Enter your response rounded to two decimal places.)