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# warranty calculation

How did they do the following calculation?

Likelihood of failure within the first five years is 22%; expected replacement cost per car sold is € 1,100 which is also the minimum price to be charged to the customer for the replacement warranty.

Thank you

How did they do the following calculation?

Likelihood of failure within the first five years is 22%; expected replacement cost per car sold is € 1,100 which is also the minimum price to be charged to the customer for the replacement warranty.

Thank you

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Year 1 (7%) + Year 2 (5%) + Year 3 (4%) + Year 4 (2%) + Year 5 (4%) = 22%

Year 1 (7%) + Year 2 (5%) + Year 3 (4%) + Year 4 (2%) + Year 5 (4%) = 22%

Hello, it´s just leveraging the data that is stated in the case, table 1.

Hello, it´s just leveraging the data that is stated in the case, table 1.

Well, Table 1 gives the combined chance of battery failure of 22% in the first 5 years (sum of annual %-ages). The interviewer provides the battery replacement cost of 5k. 22% of 5k is 1.1k.

Well, Table 1 gives the combined chance of battery failure of 22% in the first 5 years (sum of annual %-ages). The interviewer provides the battery replacement cost of 5k. 22% of 5k is 1.1k.