tal mileage allowance of 36,000 kilometers (an average of 12,000 kilometers per year) and a cost of P35 per kilometer for any kilometers over 36,0
tal mileage allowance of 36,000 kilometers (an average of 12,000 kilometers per year) and a cost of P35 per kilometer for any kilometers over 36,0
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
Mark Ewing has decided to enter contract with uber service provider in his area. The driver offers a car variety of mileage or distance to be travelled to him. All contracts were to be signed for three years. The first option has a monthly rent of P3,000, with a total mileage allowance of 36,000 kilometers (an average of 12,000 kilometers per year) and a cost of P35 per kilometer for any kilometers over 36,000. The following table summarizes each of the Uber Service Contract offered to him:
3-Year Contract |
Monthly Cost |
Mileage Allowance |
Cost Per Excess Kilometer |
Option A |
P3,000 |
30,000 |
P 35 |
Option B |
P3,500 |
45,000 |
P 25 |
Option C |
P4,000 |
54,000 |
P 15 |
- What decision would Mark make if he wanted to minimize her expected cots (monetary value)?
- Calculate the expected value of perfect information for this problem.
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