You are in the market for a new refrigerator for your company's lounge, and you have narrowed the search down to two models. The energy-efficient model sells for $1,700 and will save you $45 in electricity costs at the end of each of the next five years. The standard model has features similar to the energy-efficient model but provides no future saving in electricity costs. It is priced at only $1,500

Question

Isaac Larsen

Business

17 July, 08:48

You are in the market for a new refrigerator for your company's lounge, and you have narrowed the search down to two models. The energy-efficient model sells for $1,700 and will save you $45 in electricity costs at the end of each of the next five years. The standard model has features similar to the energy-efficient model but provides no future saving in electricity costs. It is priced at only $1,500

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Answers (1)

Know the Answer?

Yareli Barron · Answer 1

It is better to buy an energy efficient model for $ 1700.

Explanation:

It is better to buy an energy efficient model for $ 1700 because at the end of five years its costs will be less than $ 1500. It saves $ 45 each year and that would save $ 45*5 = $ 225 at the end of five years. That would result in low costs as $ 1700 - $ 225 = $ 1475 which is less than $ 1500.

Buying $1500 is not a smart choice because then it would add up to expenses. Expenses for $ 45 each year would result in $225 in five years that would add up to be $ 1725 which is higher than $ 1700.