Which refrigerator has a lower cost

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Sam is buying a refrigerator. He has two choices. A used one, at $475, should last him about three years. A new one, at $1250, would likely last eight years. Both have a scrap value of zero. The interest rate is 8 percent. (a) Which refrigerator has a lower cost? (Use a present worth analysis with repeated lives. Assume operating costs are the same.) (b) If Sam knew that he could resell the new refrigerator after three years for $1000, would this change the answer in part (a)? (Use a present worth analysis with a three-year study period. Assume operating costs are the same.)

Reference no: EM131172311

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