Suppose you are moving into a new apartment you expect to rent for ve 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 ve years.

You also have the option of buying a new energy-efcient refrigerator (with a ve-year free maintenance agreement)

for $700. The new refrigerator will reduce your electric bill by $150 per year and will have a market value of $200 after

ve years. If necessary, you can borrow money from the bank at an 8 percent rate of interest. Which option should you choose?