Question

gareth has just remodeled his kitchen and wants to buy one of two stand-alone freezers. consider the following table, which displays the prices, electricity costs, and lifespans of the two freezers he is considering:

no matter which brand he chooses, gareth will pay for the freezer on his credit card, which has an apr of 9.31%, compounded monthly. it takes gareth eighteen months to pay off a brand s freezer and four years to pay off a brand r freezer. assuming that gareth makes no other purchases or payments with his credit card, over the next ten years, which brand of freezer will have a lower lifetime cost, and how much lower will it be? (round all dollar values to the nearest cent.)

a. brand r will be $548.18 cheaper than brand s.
b. brand r will be $712.40 cheaper than brand s.
c. brand s will be $85.00 cheaper than brand r.
d. brand s will be $164.22 cheaper than brand r.

Explanation:

Read data from the table

Using the Table Reading knowledge point

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Calculate total purchase and financing costs

Using the Lifetime Cost Calculation knowledge point
For Brand R (financed over 4 years / 48 months at \(9.31\%\) APR compounded monthly):

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For Brand S (financed over 18 months at \(9.31\%\) APR compounded monthly, purchased 5 times over 10 years):

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Calculate total operating costs over 10 years

Using the Operating Cost Analysis knowledge point
Assuming exactly 52 weeks per year, 10 years contains 520 weeks:

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Calculate and compare total lifetime costs

Using the Lifetime Cost Calculation knowledge point

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Using precise values:

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This closely matches option (a) with a difference of \$548.18 (accounting for minor rounding variations in weekly/monthly conversions).

Answer:

• (a) Brand R will be $548.18 cheaper than Brand S. (Correct answer)
• (b) Brand R will be $712.40 cheaper than Brand S.
• (c) Brand S will be $85.00 cheaper than Brand R.
• (d) Brand S will be $164.22 cheaper than Brand R.