Mark's refrigerator has just died. He can get a basic fridge or a more efficient fridge with an Energy Star designation. Mark wants to consider a 10 year planning horizon using an interest rate of 5%. Use present worth analysis and provide Mark with a recommendation. Provide cash flow diagram.
Basic Unit:
Initial cost: $700
Delivery and Installation: $60
Professional Servicing (year 5): $100
Annual energy cost: $120
Salvage value (year 10): $150
Energy Star Unit:
Initial cost: $800
Delivery and Installation: $60
Professional Servicing (year 5): $100
Annual energy cost: $55
Salvage value (year 10): $175