SOLUTION: A company estimates that 0.5% of their products will fail after the original warranty period but within 2 years of the purchase, with a replacement cost of $200. If they offer a

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Question 1195672: A company estimates that 0.5% of their products will fail after the original warranty period but within 2 years of the purchase, with a replacement cost of $200.
If they offer a 2 year extended warranty for $27, what is the company's expected value of each warranty sold?
$
Answer by ikleyn(52793)   (Show Source): You can put this solution on YOUR website!
.

Expected value is


    27 - 0.005*200 = 26  dollars for each sold warranty.    ANSWER

Solved.



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