A recently-accredited College of Business discovers it is in dire financial trouble and wants to examine demand for services and costs to provide them next year.Market conditions may become more favorable,resulting in a 10% increase in enrollment,with a probability of 0.5,stay the same,with a probability of 0.3,or become less favorable,with a probability of 0.2 and a decrease in enrollment of 10%.There is a 0.9 probability that their costs to provide services will rise by 5% and a 0.1 probability that their costs will be the same.This year,they charge each of their 2000 students $3000 to take a full course load and spend $1500 on each student.
-What is the profit for the college if it experiences a decrease in enrollment and an increase in their cost to provide services?
A)$3,150,500
B)$2,850,000
C)$2,565,500
D)$1,935,000

Question

Quizplus · Accepted Answer

First, calculate the decrease in enrollment: 2000 students * 0.9 (decrease of 10%) = 1800 students. Then, calculate the increased cost per student: $1500 * 1.05 (5% increase) = $1575. The revenue from 1800 students at $3000 each is $5,400,000. The total cost for 1800 students at $1575 each is $2,835,000. The profit is the revenue minus the cost, which is $5,400,000 - $2,835,000 = $2,565,000.

A Recently-Accredited College of Business Discovers It Is in Dire