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What is the expected profit? and how many watermelons should Wally stock to maximise his expected profit? Background: Wally runs a fruit & vege stall - Wally's VegeRama - at the local Sunday market. He can buy watermelons from his supplier for $5 each. He can sell watermelons for $10 each. On any particular Sunday, demand for watermelons follows a Poisson distribution with mean 5. Any watermelons that are not sold on Sunday go bad before the next weekend. Wally's current policy is to stock 6 watermelons) A three-row table located before the question with 7 entries. First row/number is 'watermelons sold', second is 'probability', third is 'profit/loss ($)': Entry 1 = 0, 0.0067, -$30 Entry 2 = 1, 0.0337, -$20 Entry 3 = 2, 0.0842, -$10 Entry 4 = 3, 0.1404, $0 Entry 5 = 4, 0.1755, $10 Entry 6 = 5, 0.1755, $20 Entry 7 = 6, 0.1462, $30


d) How many watermelons should Wally stock to maximise his expected profit?
(4 marks)

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