As the owner of a rent-a-car agency you have determined the following statistics: Potential
Rentals Daily Probability Rental Duration Probability
0 .10 1 day .50
1 .15 2 day .30
2 .20 3 days .15
3 .30 4 days .05
4 .25
The gross profit is $40 per car per day rented. When there is demand for a car when none is available there is a goodwill loss of $80 and the rental is lost. Each day a car is unused costs you $5 per car.
Your firm initially has 4 cars.
a. Conduct a 10-day simulation of this business
b. If your firm can obtain another car for $200 for 10 days, should you take the extra car?