Question

Digitalis is a technology company that makes high-end computer processors. Their newest processor, the luteA, is going to be sold directly to the public. The processor is to be sold for $5100, making Digitalis a profit of $502. Unfortunately there was a manufacturing flaw, and some of these luteA processors are defective and cannot be repaired. On these defective processors, Digitalis is going to give the customer a full refund. Suppose that for each luteA there is a 12%chance that it is defective and an 88% chance that it is not defective. If Digitalis knows it will sell many of these processors, should it expect to make or lose money from selling them? How much?

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