ABC company has a contract to sell 200 bikes to a customer for $400 each and the customer has the right to return the bikes within 30 days for a full refund. Based on past experience the entity places the following probabilities on the number of bikes the customer is expected to return: Number of bikes returned Probability of outcome 0 25% 1 20% 2 28% 3 12% 4 15% Using the ‘expected value’ method, calculate the amount of revenue received from customers. Note: Provide all the calculations, do not just write the final answer.
ABC company has a contract to sell 200 bikes to a customer for $400 each and the customer has the right to return the bikes within 30 days for a full refund. Based on past experience the entity places the following probabilities on the number of bikes the customer is expected to return:
Number of bikes returned Probability of outcome
0 25%
1 20%
2 28%
3 12%
4 15%
Using the ‘expected value’ method, calculate the amount of revenue received from customers.
Note: Provide all the calculations, do not just write the final answer.
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