A laptop company’s annual sales depend on the market and the brand ambassador used for advertising. The market consists of three states: State I, Stat...
Question
A laptop company’s annual sales depend on the market and the brand ambassador used for advertising. The market consists of three states: State I, State II, and State III with probabilities 0.4, 0.4, and 0.3 respectively. The selling price per laptop is Rs. 40,000 and the cost price is Rs. 38,500. The table below shows the annual targeted sales (units) with and without a brand ambassador:
| Market State | With Brand Ambassador | Without Brand Ambassador |
|---|---|---|
| State I | 10,000 | 8,000 |
| State II | 8,000 | 5,000 |
| State III | 5,000 | 3,000 |
The expected profit of the company is given by
where is the profit and is the probability of each market state.
What is the maximum amount the company can afford to pay its brand ambassador?