As the Buyer for Your Business, You Can Choose to Buy

Multiple Choice

As the buyer for your business, you can choose to buy an extended warranty for each new computer for $200 each. During this period, each computer will experience either a minor ($100) or major ($500) repair bill. Repairs for each computer under warranty are reduced by 50% to $50 or $250. Assume the computer company wants to make as much money as possible, and you wish to spend as little as possible. What is your optimal strategy?

A) Never buy the warranty.
B) Always buy the warranty.
C) Buy the warranty for less than half of the computers.
D) Buy the warranty for more than half of the computers.