Company A produces and sells a popular tablet computer for $400. The tablet carries a warranty such that if the tablet fails within 1.5 years, the company replaces it with a new tablet for free. The replacement tablet carries the same warranty as the original tablet. The cost of replacement is $225.

Based on historical data, the company knows the tablets average time to failure is 2.5 years with a standard deviation of 1 year. They estimate that the time to failure of a new tablet can be modeled with the gamma distribution.=6.25and=0.4

1. Create a simple Influence diagram. (a picture of a handwritten diagram is fine)

2. Build an @Risk simulation model to estimate the number of free replacements under warranty the company can expect to provide for a given sale.

3. Calculate the NPV of expected profit (after paying for replacements) from the sale using a discount rate of 8%.

This tells us the chances of getting nbad tablets in a row is:

0: 85%

1: (0.15)^1 = 15%

2: (0.15)^2 = 2.25%

3: (0.15)^3 = 0.34%

4: (0.15)^4 = 0.05%

Above is the complete question but I just need some guidance on the Influence Diagram. If I can craft that, I think I can complete the model.

Answer rating: 100% (QA)

nfluence Diagram for Tablet Warranty Analysis Heres a breakdown of the influence diagram for the tab... View the full answer