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19 June, 16:08

Pam has just moved into a new home and wants to purchase an oven. She expects to live in this house for the foreseeable future. She has narrowed her choices down to two options. Consider the following table, which describes the prices, daily electricity costs, and lifespans of the two ovens she is considering: Brand Brand U Brand V Price $2,250 $725 Avg. Cost/Day $0.16 $0.28 Lifespan 24 years 8 years Which brand will have the lower lifetime cost, and how much lower will it be? Hints: If the product's expected lifespans differ, assume that repurchase (s) at the same price is possible to equalize the lifespans. Remember that six of the twenty-four years will be leap years, and round all dollar values to the nearest cent. a. Brand U will be $1,051.92 cheaper than Brand V. b. Brand U will be $976.92 cheaper than Brand V. c. Brand V will be $75 cheaper than Brand U. d. Brand V will be $2109.40 cheaper than Brand U.

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  1. 19 June, 18:28
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    Brand U total cost for the entire life span is computed below:

    Brand U total cost = Purchase price + electricity cost leap year + electricity cost ordinary year

    = $2250 + (6x366x$0.16) + (18x 365x$0.16)

    =$3652.56

    Brand V total cost = (Purchase price x 3) + electricity cost leap year+electricity cost ordinary year

    = ($725 x3) + (6x 366x$0.28) + (18x365x$0.28)

    = $4629.48

    Difference = Brand V-Brand U

    =$4629.48-$3652.56

    =$976.92

    Pam will have to choose Brand U because it will be cheaper by $972.92 than Brand V in their entire lifetime.
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