0093 A new device at your favorite big box store
Q93. A new device at your favorite big box store costs $200. It has a one year guarantee from the manufacturer. The cashier offers you a special deal on a three year replacement warranty (assume it's good, will be honored, etc.) — $40. You estimate that the chances of the device failing during second and third years is 25% and that the price of replacement by then will be $150. Should you buy the service plan? What are the parameters of this decision model?