document.write( "Question 1200353: A company estimates that 0.3% of their products will fail after the original warranty period but within 2 years of the purchase, with a replacement cost of $350.\r
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Algebra.Com's Answer #834489 by ikleyn(52879) $\"\"$ $\"About$

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\n" ); document.write( "A company estimates that 0.3% of their products will fail after the original warranty period
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document.write( "Notice that 0.3% = 0.003.\r\n" );
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document.write( "The expected profit of selling each warranty is\r\n" );
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document.write( "    29 - 0.003*350  dollars = 29 - 1.05 dollars = 27.95  dollars.    ANSWER\r\n" );
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document.write( "Here $29 is what a customer pays for the 2-years warranty,\r\n" );
document.write( "and 0.003*350 = 1.05 dollars is the company's average expense per unit to cover the replacement.\r\n" );
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document.write( "The net  29 - 1.05 = 27.95 dollars is the expected company's profit of each warranty sold.\r\n" );
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document.write( "$27.95 is the price which an average customer does agree to pay to the company for peace in mind.\r\n" );
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