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> Question 26 4 pts Caldor Health, a supplier of in-home health care products, introduced a new therapeutic chair carrying a one-year warranty against defects.
> Question 26 4 pts Caldor Health, a supplier of in-home health care products, introduced a new therapeutic chair carrying a one-year warranty against defects. Customers are also offered the opportunity to buy a two-year extended warranty for an additional charge. During December of 2021, its first month of availability, Caldor sold 2,400 of chairs, 40% of which were purchased with the extended warranty. The unit selling price of a chair is $500, and the unit selling price of an extended warranty is $100. Industry experience indicates the following probability distribution for the potential warranty costs: In 2022, warranty costs are $96,000 with probability 10% $60,000 with probability 40% $86,400 with probability 50% An arrangement with a service firm requires that costs for the neo-year warranty period be settled at the end of 2022. The risk-free rate of interest is 7%. Applying the expected cash flow approach for warranty expenses, at the end of the 2021 fiscal year, Caldor would record a profit (revenues minus expenses) of: $1,133,185 $1,107,420 $1,128,224 $1,123,200
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