A company is considering two different prize policies for a sweepstakes. In Policy A, the cost to enter is $5. and the overall win rate is 10%. 90% of the winners receive a product worth $10. 9.5% of the winners receive a product worth $50, and 0.5% of the winners receive $250 in cash. In Policy B, the cost to enter is $10, and the overall win rate is 15%, 80% of the winners receive a product worth $10, 18% of the winners receive a product worth $50, and 2% of the winners receive $250 in cash.
The company predicts that Policy A will attract 10.000 entries, and Policy B will attract 5000 entries. Which policy makes the largest proſt for the company? By how much?
a. Policy A, by 1500
b. Policy A, by 4000
c. Policy B, by 1500
d. Policy B, by 4000

An explanation would be really awesome!

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Ewomazinoadego Ewomazinoadego · Answer 1

The policy that makes the largest proſit for the company is Policy A, by $1500.

Profit is the amount paid by people to enter the sweepstakes less the amount they can win.

Policy A's profit: $5 - 0.1[(0.9 x $10) + (0.095 x $50) + (0.005 x $250)] = $5 - 1.5 = $3.5

$3.5 X 10,000 = $35,000

Policy B's profit:10 - 0.15[(0.8 x 10) + (0.18 x 50) + (0.02 x 250) = 10 - 3.30 = 6.7

$6.7 X 5000 = $33500

To learn more about profit, please check: https://brainly.com/question/26181966

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