Jose is thinking about purchasing a soft drink machine and placing it in a busin
ID: 2628322 • Letter: J
Question
Jose is thinking about purchasing a soft drink machine and placing it in a business office. He knows that there is a 9 percent probability that someone who walks by the machine will make a purchase from the machine, and he knows that the profit on each soft drink sold is $0.10. If Jose expects 1,402 people per day to pass by the machine and requires a complete return of his investment in one year, then what is the maximum price that he should be willing to pay for the soft drink machine? Assume 250 working days in a year and ignore taxes and the time value of money. What is Jose's expected profit from the soft drink machine? (Round answer to the nearest whole dollar, e.g. 5,275.)
Explanation / Answer
no people who buy soft drink each day = 0.09 * 1402 = 126
profit per day = 126 * 0.1 = 12.6
profit in year = 12.6 * 250 = 3150
maximum price willg to pay for machine is 3150....................ans
b)
expected profit = 12.6* 250 = 3150
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