Suppose you are moving into a new apartment that you expect to rent for five years. The owner of the apartment offers to provide you with a used refrigerator for free and promises to maintain and repair the refrigerator during the next five years. You also have the option of buying a new energy- efficient refrigerator (with a five-year free maintenance agreement) for $600. The new refrigerator will reduce your electric bill by $150 per year and will have a market value of $50 after five years. The interest rate is 12%. Use the preceding information to calculate the present value of the cost saving and resale value of the refrigerator. Then decide if the investment is worthwhile, given the present value of the cost of the refrigerator. At this interest rate, the present value of cost saving and resale value of the new refrigerator is about present value of the cost of the refrigerator. Thus, you should choose the refrigerator which is than the

Suppose you are moving into a new apartment that you expect to rent for five years. The owner of the apartment offers to provide you with a used refrigerator for free and promises to maintain and repair the refrigerator during the next five years. You also have the option of buying a new energy- efficient refrigerator (with a five-year free maintenance agreement) for $600. The new refrigerator will reduce your electric bill by $150 per year and will have a market value of $50 after five years. The interest rate is 12%. Use the preceding information to calculate the present value of the cost saving and resale value of the refrigerator. Then decide if the investment is worthwhile, given the present value of the cost of the refrigerator. At this interest rate, the present value of cost saving and resale value of the new refrigerator is about present value of the cost of the refrigerator. Thus, you should choose the refrigerator which is than the

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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