Question

The Brady & Matthew Camera Company has just come out with their newest professional quality digital camera, the ToughPix1. The company is selling this camera only through its new mobile

app at a profit of $382 per camera. This purchase comes with a guarantee that, barring gross negligence, if the camera breaks in the first two years after purchase, Brady & Matthew will replace it free of charge. Replacing a camera in this way costs the company $2300. Suppose for each ToughPix1 there is a 5% chance that it will need to be replaced exactly once, a 2% chance that it will need to be replaced exactly twice, and a 93%chance that it will not need to be replaced. If Brady & Matthew knows that it will sell many of these cameras, should it expect to make or lose money from selling them? How much?

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