You Have Heard About a New Light Bulb That Is

Multiple Choice

You have heard about a new light bulb that is costly to purchase but uses little electricity and thus allows you to save money on your utility bill. Suppose the new light bulb costs $10 today but next year your electricity bill will be $50 lower. If the interest rate is 10%, what is the net present value of buying this new light bulb and using it for one year?

A) $40
B) -$45.45
C) $55
D) $35.45