To generate leads for new business, Gustin Investment Services offers free financial planning seminars at major hotels in Southwest Florida. Gustin conducts seminars for groups of 25 individuals. Each seminar costs Gustin $3700, and the average first-year commission for each new account opened is $5300. Gustin estimates that for each individual attending the seminar, there is a 0.01 probability that he/she will open a new account.

Required:

a. Determine the equation for computing Gustin's profit per seminar, given values of the relevant parameters.

Question

Business

Shelby Archer

30 October, 11:58

To generate leads for new business, Gustin Investment Services offers free financial planning seminars at major hotels in Southwest Florida. Gustin conducts seminars for groups of 25 individuals. Each seminar costs Gustin $3700, and the average first-year commission for each new account opened is $5300. Gustin estimates that for each individual attending the seminar, there is a 0.01 probability that he/she will open a new account.

Required:

a. Determine the equation for computing Gustin's profit per seminar, given values of the relevant parameters.

+3

Answers (1)

Know the Answer?

Bradley Palmer · Answer 1

See Explanation section

Explanation:

We know,

Profit = Sales - Expenses

To find the total seminar profit, we have to determine the number of newly opened accounts. As it is binomial distribution, we have to make an equation to reach out the seminar profit -

Therefore, the profit equation = (new opened account * Sales commission) - Fixed seminar costs

Since we do not know how many attended open account, the profit equation of seminar = (New open account * $5,300) - $3,700