Suppose you work for a company that manufactures electronics. The development analysts estimate that 2% of their flagship product will fail after the original warranty period but within 2 years of the purchase, with a replacement cost of $1500.
How much should they charge for a 2 year extended warranty so that they will still make money selling the extended warranties in the long run and keep the cost of the warranties as low as possible to make them more marketable?
Write up your proposal to the VP of marketing and promotions with enough explanation that someone from our class could understand it.