Question: Four years ago, Victor Consuelo purchased a very reliable automobile (as rated by a reputable consumer advocacy publication). His warranty has just expired, but the manufacturer has just offered him a 5-year, bumper-to bumper warranty extension. The warranty costs $3,400. Consuelo constructs the following probability distribution with respect to anticipated costs if he chooses not to purchase the extended warranty.
![67_Probability.png](https://secure.tutorsglobe.com/CMSImages/67_Probability.png)
a. Calculate Victors expected cost.
b. Given your answer in part (a), should Victor purchase the extended warranty (assume risk neutrality)? Explain.