Extended Warranty. Ted just moved into an apartment, and it does not have a refrigerator. A refrigerator is worth $3 every day because Ted will eat out less. Ted has a discount rate of 28%. Refrigerators usually last 4 years.
a. How much is Ted willing to spend on a refrigerator?
b. Lowe's is offering a financing deal with 10% down payment and 4 years of payments every year of payments equals 25% of the purchase price. At these terms, how much is Ted willing to spend on the fridge?