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

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NPV and ANPV decisions???PersonalFinance Problem Richard and Linda Butler decide that it istime to purchase a? high-definition (HD) television because thetechnology has improved and prices have fallen over the past 3years. From their? research, they narrow their choices to two?sets, the Samsung? 64-inch plasma with 1080p capability and theSony? 64-inch plasma with 1080p features. The price of the Samsungis ?$2,305 and the Sony will cost ?$2,730. They expect to keep theSamsung for 3? years; if they buy the more expensive Sony? unit,they will keep the Sony for 4 years. They expect sell the Samsungfor ?$405 by the end of 3? years; they expect to sell the Sony for?$375 at the end of the year 4. Richard and Linda estimate thatthe? end-of-year entertainment benefits? (i.e., not going to moviesor events and watching at? home) from the Samsung to be $950 andfor the Sony to be $1,035. Both sets can be viewed as quality unitsand are equally risky purchases. They estimate their opportunitycost to be 9.2%. The Butlers wish to choose the better alternativefrom a purely financial perspective. To perform this analysis theywish to do the? following:
a. Determine the NPV of the Samsung HD plasmaTV.
b. Determine the ANPV of the Samsung HD plasmaTV.
c. Determine the NPV of the Sony HD plasmaTV.
d. Determine the ANPV of the Sony HD plasmaTV.
e. Which set should the Butlers purchase and?why?

Answer & Explanation Solved by verified expert

3.9 Ratings (502 Votes)

a NPV of the Samsung HD plasma TV Year Annual Cash Flow Present Value factor at 920 Present Value of Cash Flow 1 950 091575 86996 2 950 083860 79667 3 1355 950 405 076795 104057 TOTAL 252230 270720 Net Present See Answer

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NPV and ANPV decisions???PersonalFinance Problem Richard and Linda Butler decide that it istime to purchase a? high-definition (HD) television because thetechnology has improved and prices have fallen over the past 3years. From their? research, they narrow their choices to two?sets, the Samsung? 64-inch plasma with 1080p capability and theSony? 64-inch plasma with 1080p features. The price of the Samsungis ?$2,305 and the Sony will cost ?$2,730. They expect to keep theSamsung for 3? years; if they buy the more expensive Sony? unit,they will keep the Sony for 4 years. They expect sell the Samsungfor ?$405 by the end of 3? years; they expect to sell the Sony for?$375 at the end of the year 4. Richard and Linda estimate thatthe? end-of-year entertainment benefits? (i.e., not going to moviesor events and watching at? home) from the Samsung to be $950 andfor the Sony to be $1,035. Both sets can be viewed as quality unitsand are equally risky purchases. They estimate their opportunitycost to be 9.2%. The Butlers wish to choose the better alternativefrom a purely financial perspective. To perform this analysis theywish to do the? following:a. Determine the NPV of the Samsung HD plasmaTV.b. Determine the ANPV of the Samsung HD plasmaTV.c. Determine the NPV of the Sony HD plasmaTV.d. Determine the ANPV of the Sony HD plasmaTV.e. Which set should the Butlers purchase and?why?