1. The Lob Sport Shop has an opportunity to purchase tennis rackets from the bankrupt Foot Fault Manufacturing Co. However, Foot Fault produced the rackets with a very poor quality of strings, so that they will need new strings by the next season. The rackets can be purchased for $19, and Lob plans to sell them for $40 as a special promotion

(with the hope of selling the restring jobs in the near future). If the rackets are not sold this season, Lob must restring them before selling them next season. But the price next year should be less than $40 because customers will know that this was the price previously—and because the Foot Fault rackets will be known as having poorquality strings even though this will not be true of the rackets Lob tries to sell next year. Lob figures it will lose $10 per racket that is not sold this season.

The probability of selling various quantities of rackets this season has been estimated and is shown in the following table. How many rackets should Lob buy?

Transcribed Image Text:

RACKETS SOLD PROBABILITY OF SELLING EXACTLY THIS NUMBER RACKETS SOLD PROBABILITY OF SELLING EXACTLY THIS NUMBER 50 0.05 100 0.12 60 0.10 110 0.09 70 0.15 120 0.06 80 0.20 130 0.03 90 0.20