ScholarMatic: Explanation & Answer
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Your company has a customer who is shutting down a production line, and it is your responsibility to dispose of the extrusion machine. The company could keep it in inventory for possible future product and estimates that the reservation value is $200,000. Your dealings on the secondhand market lead you to believe that there is a 0.4 chance a random buyer will pay $230,000, a 0.25 chance the buyer will pay $300,000, a 0.1 chance the buyer will pay 390,000, and a 0.25 chance it will not sell.
If you must commit to a posted price, what price maximizes profits? Explain and show calculations.
ScholarMatic: Explanation & Answer
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