Question
Asked Sep 28, 2019
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A company estimates that 0.9% of their products will fail within two years after the original warranty ends, with a replacement cost of $50.

If they offer a 2 year extended warranty for $7, what is the company's expected value of each warranty sold?

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The company's expected value of each w...

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7(1-0.009)(($50 - $7)) x 0.009 6.937+(-0.387) = $6.55

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