Business, 25.11.2019 22:31 bunn95

Suppose that you own a store that sells a particular brand of stove for $1000. you purchase the stoves from a distributor for $800 each. you believe that each stove has a lifetime that is an exponential random variable with rate parameter λ = 1 10 , where the unit of time is in years. you would like to offer the following extended warranty on this stove: if the stove breaks within r years, you will replace the stove completely (at a cost of $800 to you). if the stove lasts longer than r years, the extended warranty is void. let c be the cost you charge a customer for this extended warranty. given r, what value of c will you break even, that is, you will make zero profit from the warranty itself? what do you think is a reasonable choice of r

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Suppose that you own a store that sells a particular brand of stove for $1000. you purchase the stov...