Richard and Linda Butler decide that it is time to purchase a? high-definition (HD) television because...

90.2K

Verified Solution

Question

Finance

Richard and Linda Butler decide that it is time to purchase a?high-definition (HD) television because the technology has improvedand prices have fallen over the past 3 years. From their? research,they narrow their choices to two? sets, the Samsung? 64-inch plasmawith 1080p capability and the Sony? 64-inch plasma with 1080pfeatures. The price of the Samsung is ?$2,375 and the Sony willcost ?$2,740. They expect to keep the Samsung for 3? years; if theybuy the more expensive Sony? unit, they will keep the Sony for 4years. They expect sell the Samsung for ?$405by the end of 3?years; they expect to sell the Sony for ?$365 at the end of theyear 4. Richard and Linda estimate that the? end-of-yearentertainment benefits? (i.e., not going to movies or events andwatching at? home) from the Samsung to be ?$930and for the Sony tobe ?$970. Both sets can be viewed as quality units and are equallyrisky purchases. They estimate their opportunity cost to be 8.6 %.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

4.1 Ratings (571 Votes)

a NPV of the Samsung HD plasma TV Year Annual Cash Flow Present Value factor at 860 Present Value of Cash Flow 1 930 092081 85635 2 930 084789 78854 3 1335 930 405 078075 104230 TOTAL 254945 268719 Net Present See Answer

Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:

Unlimited Question Access with detailed Answers
Zin AI - 3 Million Words
10 Dall-E 3 Images
20 Plot Generations
Conversation with Dialogue Memory
No Ads, Ever!
Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!

Become a Member

Transcribed Image Text

Richard and Linda Butler decide that it is time to purchase a?high-definition (HD) television because the technology has improvedand prices have fallen over the past 3 years. From their? research,they narrow their choices to two? sets, the Samsung? 64-inch plasmawith 1080p capability and the Sony? 64-inch plasma with 1080pfeatures. The price of the Samsung is ?$2,375 and the Sony willcost ?$2,740. They expect to keep the Samsung for 3? years; if theybuy the more expensive Sony? unit, they will keep the Sony for 4years. They expect sell the Samsung for ?$405by the end of 3?years; they expect to sell the Sony for ?$365 at the end of theyear 4. Richard and Linda estimate that the? end-of-yearentertainment benefits? (i.e., not going to movies or events andwatching at? home) from the Samsung to be ?$930and for the Sony tobe ?$970. Both sets can be viewed as quality units and are equallyrisky purchases. They estimate their opportunity cost to be 8.6 %.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?