Problem
Your house needs a new refrigerator and now (Xmas shopping season) is a good time to buy one. After a lot of research, eventually you will choose between two models: Brand A's Energy Saving French-door refrigerator (costs $2300) vs. Brand B's Side-by-side refrigerator (costs $1850, not qualified for Energy Saving). The RI government now offers tax-free (7% of the sales price) on all appliances that are qualified as "Energy Saving." Based on the information, Brand A's refrigerator will cost $13 per month in electricity, and Brand B's refrigerator will cost $16 per month in electricity. Also based on Consumer Reports' assessment, a French-door refrigerator has an estimated average lifetime of 12 years, and a side-by-side door refrigerator has an estimated average lifetime of 15 years. You don't have to use any discount (means 0%) for future costs, but if you like a challenge, please use a 5% discount rate for future annual costs.
i. Use all information above to calculate the Total Cost of Ownership (TCO) for Brands A's and B's refrigerator. Then divide the TCO by its lifetime to obtain the average annual TCO.
ii. Based on the TCO information, which refrigerator is the lower cost option?