Scenario 15.4: Consider the Following Information

Multiple Choice

Scenario 15.4:
Consider the following information:
You are considering buying a refrigerator. A new model would lower your electricity bills from $1200 per year to $1000 per year, because your current refrigerator is very inefficient. The refrigerator you want sells for $800, and you expect it to last for 10 years. The interest rate is 6%.
-Refer to Scenario 15.4. The net present value of the purchase is:

A) $200 × 10 - $800.
B) $200/1.06 - $800.
C) $200/1.06¹⁰ - $800.
D) $200 × (1 + 1/1.06 + 1/1.06² + ... + 1/1.06⁹) - $800.
E) $200 / (1 + 1/1.06 + 1/1.06² + ... + 1/1.06⁹) - $800.