Two refrigerators are available for purchase. One costs more to buy but less to operate.
Price Oper. Costs/year
A $400 $100
B 340 120
At what interest rate would you be indifferent between the two machines if they last three years?|||you can figure this out by multiplying the payment by term..It's not the rate over all that will cost you, term of the loan will play a factor|||I'm confused... are we talking about interest rate or operating cost? They're not the same thing by any stretch of the imagination.
Unless we're talking an extremely high retail price, (upwards of $2000, which would make saving money on operating costs and entirely moot point) I would always choose the one with the lower operating cost. Refrigerators can last for decades. The initial price is a one-time cost, but operating costs last the lifetime of the appliance.
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