Topic: Net Present Value
Chris is renting a house, and it does not have a refrigerator. A refrigerator is worth $3 every day because Chris will eat out less. Chris has a discount rate of 18%. Refrigerators usually last 5 years.
a. How much is Chris willing to spend on a refrigerator?
b. Lowe’s is offering a financing deal with 10% down payment and payments spread over five years. Every year of payments equals 25% of the purchase price. At these terms, how much is Chris willing to spend on the fridge.