Please solve using Excel @Risk add-in the question is Textbook Problem from Practical Management Science 6th Edition Chapter 11.4 Problem 30P. In the solution please provided step-by-step excel formulas used. The full Question is attached in the image. Seas Beginning sells clothing by mail order. An important question is when to strike a customer from the company’s mailing list. At present, the company strikes a customer from its mailing list if a customer fails to order from six consecutive catalogs. The company wants to know whether striking a customer from its list after a customer fails to order from four consecutive catalogs results in a higher profit per customer. The following data are available: -> If a customer placed an order the last time she received a catalog, then there is a 20% chance she will order from the next catalog. -> If a customer last placed an order one catalog ago, there is a 16% chance she will order from the next catalog she receives. -> If a customer last placed an order two catalogs ago, there is a 12% chance she will order from the next catalog she receives. -> If a customer last placed an order three catalogs ago, there is an 8% chance she will order from the next catalog she receives. -> If a customer last placed an order four catalogs ago, there is a 4% chance she will order from the next catalog she receives. -> If a customer last placed an order ve catalogs ago, there is a 2% chance she will order from the next catalog she receives. It costs $2 to send a catalog, and the average profit per order is $30. Assume a customer has just placed an order. To maximize expected profit per customer, would Seas Beginning make more money canceling such a customer after six nonorders or four nonorders?
Please solve using Excel @Risk add-in the question is Textbook Problem from Practical Management Science 6th Edition Chapter 11.4 Problem 30P. In the solution please provided step-by-step excel formulas used. The full Question is attached in the image.
Seas Beginning sells clothing by mail order. An important question is when to strike a customer from the company’s mailing list. At present, the company strikes a customer from its mailing list if a customer fails to order from six consecutive catalogs. The company wants to know whether striking a customer from its list after a customer fails to order from four consecutive catalogs results in a higher profit per customer. The
following data are available:
-> If a customer placed an order the last time she received a catalog, then there is a 20% chance she will order from the next catalog.
-> If a customer last placed an order one catalog ago, there is a 16% chance she will order from the next catalog she receives.
-> If a customer last placed an order two catalogs ago, there is a 12% chance she will order from the next catalog she receives.
-> If a customer last placed an order three catalogs ago, there is an 8% chance she will order from the next catalog she receives.
-> If a customer last placed an order four catalogs ago, there is a 4% chance she will order from the next catalog she receives.
-> If a customer last placed an order ve catalogs ago, there is a 2% chance she will order from the next catalog she receives.
It costs $2 to send a catalog, and the average profit per order is $30. Assume a customer has just placed an order. To maximize expected profit per customer, would Seas Beginning make more money canceling such a customer after six nonorders or four nonorders?
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