Steady State Probabilities Problem

Problem 4: Steady State Probabilities Problem (30 points)At the beginning of each year, your computer is considered good, fair, or broken/obsolete. A good computer this yearwill be good at the beginning of next year with probability 0.45; fair with a probability 0.38; or broken/obsolete withprobability 0.17. A fair computer this year will be fair at the beginning of the next year with probability 0.60 or broken/obsolete with probability 0.40. A broken/obsolete computer at the beginning of this year mustimmediately be replacedby a good computer and therefore you will have a good computer this year.It costs $1,500 to purchase a good computer; a fair computer can be traded in for $500; and a broken/obsolete computerhas no trade-in value. It costs $100 per year to keep all the software and hardware of a good computer updated and$350 per year for a fair computer (this cost includes upgrades and lost time waiting for the computer to respond orprocess).A.(14pts.)What is the expected cost per year if you use your computer until it breaks down?B.(14pts.)What is the expected cost per year if you replace your computer immediately as soon as it becomes fair?C.(2pts.)According to your answers above, should you replace your computer as soon as it becomes fair orshould you use it until it breaks down or is obsolete?

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