- #1
jdawg
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I hope that I am posting this in the right place, I wasn't sure where to post this question!
Chris is renting a house, and it does not have a refrigerator. A refrigerator is worth $3 every day because Chris will eat out less. Chris has a discount rate of 18%. Refrigerators usually last 5 years. Lowe’s is offering a financing deal with 10% downpayment and payments spread over five years. Every year of payments equals 25% of the purchase price. At these terms, how much is Chris willing to spend on the fridge?
I am so confused on this problem. My professor already gave us the solution, but he did it in an excel spreadsheet and I need to know how to do it by hand for my upcoming midterm. I think what he did in the spreadsheet was adjust the cost until he got an NPV of 0. This is what he calculated Chris was willing to spend: $3886.
Thanks for any help!
Chris is renting a house, and it does not have a refrigerator. A refrigerator is worth $3 every day because Chris will eat out less. Chris has a discount rate of 18%. Refrigerators usually last 5 years. Lowe’s is offering a financing deal with 10% downpayment and payments spread over five years. Every year of payments equals 25% of the purchase price. At these terms, how much is Chris willing to spend on the fridge?
I am so confused on this problem. My professor already gave us the solution, but he did it in an excel spreadsheet and I need to know how to do it by hand for my upcoming midterm. I think what he did in the spreadsheet was adjust the cost until he got an NPV of 0. This is what he calculated Chris was willing to spend: $3886.
Thanks for any help!