Extended Warranty. Chris is renting a house, and it does not have a refrigerator

Question

Extended Warranty. Chris is renting a house, and it does not have a refrigerator. A refrigerator is worth $2 every day because Chris will eat out less. Chris has a discount rate of 20%. Refrigerators usually last 5 years.

a. How much is Chris willing to spend on a refrigerator?

b. Lowes is offering a financing deal with 10% downpayment and 6 years of payments every year of payments equals 20% of the purchase price. At these terms, how much is Chris willing to spend on the fridge.

c. Chris buys a $1000 refrigerator on the finance plan. The refrigerator has a 3 year warranty. Chris can buy a 3 year extension of the warranty (making it an 6 year warranty) for $600. Assume the refrigerator will break when it is exactly five years old, and will not be repairable. The warranty will replace the broken refrigerator with a new unit. Should Chris buy the warranty? Assume the same Lowes financing deal will be available in 5 years.

Explanation / Answer

2$*365*5-20%=?

730*5-20%=?

3650$-20%=?

3650-(3650/100*20)=?

3650-730=2920$

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