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Question 2 8 8 pts Dawn's Video Diversions wants to expand their DVD rental business. They are considering two options: ( 1 ) building another
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Dawn's Video Diversions wants to expand their DVD rental business. They are considering two options: building another physical store or setting up an online rental service. For the store option, they will need to purchase DVDs at a total wholesale dealer price of $ In addition to the initial inventory investment, the cost of building a new store is $ For the online service option, they will need to purchase DVDs at a total wholesale dealer price of $ because of the extra rental time to cover mailing. In this online service case, besides the initial inventory investment, additionally, the cost of setting up the online service platform is $ The variable cost of renting out each DVD from the physical store is estimated to be cents, while the cost of renting out each DVD from the online site, including postage, is estimated to be $ The rental charge for customers ie revenuesales per DVD is expected to be $ in both physical store and online service cases. Show your workusing a blank sheet and uploading the worked sheet back onto Canvasfor full credit.
a What is the point of indifference in terms of # of rentals between the store and the online service options? pts
b If the rental demand is expected to be DVDs the better choice between the two options will be
For and below You believe that there may be a postage increase that would raise the online' rental variable cost to $from $
c In this case, what will be the newupdated point of indifference in terms of # of rentals
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