Problema Solution
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.
Answer provided by our tutors
the lifetime cost of Brand U over 24 years is total of:
the purchase cost: $2,250
lifetime electricity cost for 24 years: (18*365 + 6*364)*0.16 = $1,400.64
Lifetime cost of Brand U = 2250 + (18*365 + 6*364)*0.16 = $3,650.64
the lifetime cost of Brand V over 24 years is total of:
the purchase cost: $725*(24/8) = $2175
lifetime electricity cost for 24 years: (18*365 + 6*364)*0.28 = $2,451.12
Lifetime cost of Brand V = 2175 + (18*365 + 6*364)*0.28 = $4,626.12
Brand U has lower lifetime cost, and it is by $4,626.12 - $3,650.64 = $975.48 lower then the lifetime cost for Brand V.