A small video store has nine copies of the DVD Captain Underpants, The Movie in its store. There are 15 customers every day who request this movie for their children. If the movie is not on the shelf, they leave and go to a competing store. Customers arrive evenly distributed over 24 hours. The average rental duration is 36 hours.
a. What is the likelihood that a customer going to the video store will find the movie available?
b. Assume each rental is $5. How much revenue does the store make per day from the movie?
c. Assume each child that is not able to obtain the movie will receive a $1 bill. How much money would the store have to give out to children requesting Captain Underpants every day?
d. Assume the demand for the movie will stay the same for another six months. What would be the payback time (not considering interest rates) for purchasing an additional copy of the movie at $50? Consider the extra revenues related to question b and the potential cost savings (part (c)).