As the Owner of a Rent-A-Car Agency You Have Determined

Essay

As the owner of a rent-a-car agency you have determined the following statistics: $$\begin{array} { c c c c } \begin{array} { c } \text { Potential } \\\text { Rentals Daily }\end{array} & \text { Probability } & \begin{array} { c } \text { Rental } \\\text { Duration }\end{array} & \text { Probability } \\\hline 1 & 10 & 1 \text { day } & .50 \\2 & .15 & 2 \text { day } & .30 \\3 & .20 & 3 \text { days } & .15 \\4 & .30 & 4 \text { days } & .05\end{array}$$ 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 using Row #1 below for demand and Row #2 below for rental length. $$\begin{array} { l l l l l l l l l l l } \text { Row \#1: } & 63 & 88 & 55 & 46 & 55 & 69 & 13 & 17 & 36 & 81 \\\hline \text { Row \#2: } & 59 & 09 & 57 & 87 & 07 & 92 & 29 & 28 & 64 & 36\end{array}$$
b.If your firm can obtain another car for $200 for 10 days, should you take the extra car?