The owner of the Finer Diner submitted a proposal to you in

The owner of the Finer Diner submitted a proposal to you in hopes of selling the business to you. His asking price is $250,000. Your financial institution advises that your monthly payment to finance that amount would be $1850.00. This is in addition to other business expenses you would incur such as product, payroll, etc.

Upon reviewing the accounting records from the restaurant, you discover that it grosses roughly $3000 per day on 6 out of 10 days. Determine the estimated probability that the restaurant will gross over $3000:

A)    On at least 4 out of 5 business days,

B)    On at least 5 out of 10 business days,

C)    On at least 7 out of 10 business days.

Solution

Let X be the number of days that expenses gross over 3000

Then X is binomial with p = 6/10 = 0.6

A) P(x>=4 in 5 days)= 0.33696

B) P(x>=5 in 10days) =0.83376

C) P(X>=7 in 10 days) = 0.38228