Base-Year Analysis

Finance, a la shmoop. what is expected return? Okay we've been experimenting for

months on libertarians with cancer in a gwangju prison. Our drug is gonna do one [ man swallows pill]

of three things. A. it may make the prisoners glow in the dark. Not all that

useful as a drug discovery but it would allow investors to sell the company to [man's face glows]

cirque de soleil who would be thrilled to cut down on bodypaint expenses. All

right well if event A happens investors will get at least a 20% return on our [circus performers shown]

money odds of the the glow must go on happening ? 35% . okay moving on. Event B, our

drug may well just kill them - yeah that's a bunch of libertarians in a gwangju

prison. Who's gonna notice, right? in which case investors lose all of their money [money on fire]

and the glow must go on just folds up tent, and goes away. The return there

would be zero. Odds of this happening? Well, 60% yeah

six out of ten. Probably gonna die. okay event C the drug cures cancer! If that [written explanation shown]

happens while investors get a thousand percent return on their money .Save the

world and in general improve their tinder match ratio by like a zillion.

Odds of this happening, well just 5% but hey it's worth a shot right?

So our adjusted probability chart looks like- this - see we got return and odds and [chart shown]

expect the case 2035, 7 yeah there we go.

So what is all this telling us ? Well that the overall expected return - yeah you

knew we'd get there eventually - is a 57% return on our investment. Great return!

bottom line do it the chance of curing cancer would be well worth the risk. And [people dance]

if not well at least there would be fewer bicycling accidents.