A car dealer is offering 3 choices for two-year lease plans. Assume a car buyer

Question

A car dealer is offering 3 choices for two-year lease plans. Assume a car buyer expects to drive between 15,000 and 35,000 miles during the next two years according to the following probability distribution:

GBA 211 Assignment #1-Wailea V-K-Excel Wailea Visiko- Insert Page Layout Formulas Data Review View Help Foxit PDF Tell me what you want to do Cut E Copy AutoSum ’ A 11A A 2 Wrap Text General Paste B 1 u ii- · Merge & Center· s-% , f: Conditional Fomat as Cell Insert Delete Format Fomatting Table Styles Sort & Find & Filter Select Fonmat Painter Clear Clipboard Font Alignment Number Cells Editing N7 1 A car dealer is offering 3 choices for two-year lease plans. Fixed Monthly Plan Additional Cost per Mile 200 235 210 $0.095 per mile $0.061 for the first 6,000 miles; $0.050 per mile thereafter $0.000 for the first 6,000 miles; $0.140 per mile thereafter Assume a car buyer expects to drive between 15,000 and 35,000 miles during the next two 10 years according to the following probability distribution: 12 Miles driven Probabili 13 14. 12,0000.05 15,0000.15 18,0000.25 0,0000.35 0.2 17 19 The car buyer wants to minimize their total cost for the two-year lease contract (24 Question 1 Question 2 Ready - + 100%

Explanation / Answer

Q1. The rider will cover the distance of ((12000*0.05)+(15000*0.15)+(18000*0.25)+(20000*0.35)+(22000*0.2) = 18750 km.

Now as per plan A, the total cost = 200$ + (18750*.095)$ = 1981.25$

As per plan B, total cost is = 235$ + (.061*6000)$ + ((18750-6000)*0.05) = 1238.50$

As per plan C, total cost = 210$ + (0*6000)$ + ((18750-6000)*0.14) = 1995$

So if the rider wants to go for minimisation of his cost, then he will go for the plan B.

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