SOLUTION: A company estimates that 0.2% of their products will fail after the original warranty period but within 2 years of the purchase, with a replacement cost of $250. If they offer a

Question 1195581: A company estimates that 0.2% of their products will fail after the original warranty period but within 2 years of the purchase, with a replacement cost of $250.
If they offer a 2 year extended warranty for $38, what is the company's expected value of each warranty sold?

Answer by ikleyn(52776) (Show Source): You can put this solution on YOUR website!
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the company's expected value of each warranty sold = 38 - 0.002*250 = 38 - 0.5 = 37.5 dollars.    ANSWER

Solved.

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