NPV and ANPV decisions???Personal Finance Problem Richard and Linda Butler decide that it is time to...

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Finance

NPV and ANPV decisions???Personal Finance Problem Richard andLinda Butler decide that it is time to purchase a? high-definition(HD) television because the technology has improved and prices havefallen over the past 3 years. From their? research, they narrowtheir choices to two? sets, the Samsung? 64-inch plasma with 1080pcapability and the Sony? 64-inch plasma with 1080p features. Theprice of the Samsung is
?$2 comma 3402,340
and the Sony will cost
?$2 comma 7002,700.
They expect to keep the Samsung for 3? years; if they buy themore expensive Sony? unit, they will keep the Sony for 4 years.They expect sell the Samsung for
?$420
by the end of 3? years; they expect to sell the Sony for
?$340
at the end of the year 4. Richard and Linda estimate that the?end-of-year entertainment benefits? (i.e., not going to movies orevents and watching at? home) from the Samsung to be
?$890
and for the Sony to be
?$1 comma 0251,025.
Both sets can be viewed as quality units and are equally riskypurchases. They estimate their opportunity cost to be
8.9 %
The Butlers wish to choose the better alternative from a purelyfinancial perspective. To perform this analysis they wish to dothe? following:
a. Determine the NPV of the Samsung HD plasma TV.
b. Determine the ANPV of the Samsung HD plasma TV.
c. Determine the NPV of the Sony HD plasma TV.
d. Determine the ANPV of the Sony HD plasma TV.
e. Which set should the Butlers purchase and? why?

Answer & Explanation Solved by verified expert

3.8 Ratings (476 Votes)

a NPV of the Samsung HD plasma TV Year Annual Cash Flow Present Value factor at 890 Present Value of Cash Flow 1 890 091827 81726 2 890 084323 75047 3 1310 890 420 077431 101435 TOTAL 253581 258208 Net Present Value NPV See Answer

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NPV and ANPV decisions???Personal Finance Problem Richard andLinda Butler decide that it is time to purchase a? high-definition(HD) television because the technology has improved and prices havefallen over the past 3 years. From their? research, they narrowtheir choices to two? sets, the Samsung? 64-inch plasma with 1080pcapability and the Sony? 64-inch plasma with 1080p features. Theprice of the Samsung is?$2 comma 3402,340and the Sony will cost?$2 comma 7002,700.They expect to keep the Samsung for 3? years; if they buy themore expensive Sony? unit, they will keep the Sony for 4 years.They expect sell the Samsung for?$420by the end of 3? years; they expect to sell the Sony for?$340at the end of the year 4. Richard and Linda estimate that the?end-of-year entertainment benefits? (i.e., not going to movies orevents and watching at? home) from the Samsung to be?$890and for the Sony to be?$1 comma 0251,025.Both sets can be viewed as quality units and are equally riskypurchases. They estimate their opportunity cost to be8.9 %The Butlers wish to choose the better alternative from a purelyfinancial perspective. To perform this analysis they wish to dothe? following:a. Determine the NPV of the Samsung HD plasma TV.b. Determine the ANPV of the Samsung HD plasma TV.c. Determine the NPV of the Sony HD plasma TV.d. Determine the ANPV of the Sony HD plasma TV.e. Which set should the Butlers purchase and? why?