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7. Critical analysis Q13 Suppose you are moving into a new apartment that you expect to rent for five years. The owner of the apartment offers to provide you with a used refrigerator for free and promises to maintain and repair the refrigerator during the next five years. You also have the option of buying a new energy-efficient refrigerator (with a five-year free maintenance agreement) for $800. The new refrigerator will reduce your electric bill by $200 per year and will have a market value of $100 after five years. The interest rate is 11%. Use the preceding information to calculate the present value of the cost saving and resale value of the refrigerator. Then decide if the investment is worthwhile, given the present value of the cost of the refrigerator. At this interest rate, the present value of cost saving and resale value of the new refrigerator is about , which is than the present value of the cost of the refrigerator. Thus, you should choose the refrigera

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