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You work for a small car dealership. You must decide how many new cars (of the latest model) to order. Because of shipping costs, orders
You work for a small car dealership. You must decide how many new cars (of the latest model) to order. Because of shipping costs, orders must be placed in multiples of 10 . You can either order 10, 20, 30 or 40 cars. Each car costs 45k if you order 10 - for quantities greater than 10, you receive a discount of 5% per additional multiple of 10 ordered (20 cars would be 5\%, 30 would be 10%, etc). The cars can be sold for $75K each. Any that are left unsold can be auctioned after the season is over for $25k. You have received a forecast that the probability that you will sell 5 cars is 10%,15 cars is 35%,25 cars is 40% and 35 cars is 15%. Using a payoff table (in thousands) to provide the payoffs, how many cars should you order based on the expected value approach and what is the expected value
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