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A passenger bus service operator is considering entering into maintenance contract for a new bus which would cost him K2 500. With the contract in
A passenger bus service operator is considering entering into maintenance contract for a new bus which would cost him K2 500. With the contract in place there is a probability of 0.10 of a breakdown over the contract period, but without it the probability is 0.30. If he can avoid a breakdown his profit will be K20 000 but this will drop to K10 000 in the event of such a breakdown. Should he enter into the maintenance contract?
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