QUESTION 1 As in the Indicator, you value water very much when you have none and you get a first few gallons. You value it less after getting 20 gallons. Less than that after getting 200 gallons. And so on. You made an agreement with Al's Rye Barn to buy 10 gallons of rye whiskey per month, every month, for the next 6 years. Obviously, you love rye whiskey. However, it has a marginal value to you. After 100 gallons, you begin to value each gallon less. In fact, you value gallon 101 exactly 6% less than 100, 102 6% less than 101 and so on for each additional gallon. If the value of a gallon of your favorite rye whiskey is $50 per gallon for gallon 1 then how much should you pay in present worth for the 6 contract with Al's Rye Barn if your MARR is 10 per month QUESTION 2 If you could extend the contract in problem 1 to 150 months instead of 72, then: In month 150, the marginal value of a gallon of rye whiskey would be $0, thus after this you would have to either get it for free or Als Rye Barn would have to pay you to take more. You would probably have liver disease. Your alternative, or opportunity cost, would now be a better choice considering how much you value rye whiskey at this point All of the above As in the Indicator, you value water very much when you have none and you get a first few gallons. You value it less after getting 20 gallons. Less than that after getting 200 gallons. And so on. You made an agreement with Als Rye Barn to buy 10 gallons of rye whiskey per month, every month, for the next 6 years. Obviously you love rye whiskey. However, it has a marginal value to you. After 100 gallons, you begin to value each gallon less. In fact, you value gallon 101 exactly 6% less than 100, 102 6% less than 101 and so on for each additional gallon. If the value of a gallon of your favorite rye whiskey is $50 per gallon for gallon 1 then how much should you pay in present worth for the 6 contract with Al's Rye Barn if your MARR is 10% per month? QUESTION 1 As in the Indicator, you value water very much when you have none and you get a first few gallons. You value it less after getting 20 gallons. Less than that after getting 200 gallons. And so on. You made an agreement with Al's Rye Barn to buy 10 gallons of rye whiskey per month, every month, for the next 6 years. Obviously, you love rye whiskey. However, it has a marginal value to you. After 100 gallons, you begin to value each gallon less. In fact, you value gallon 101 exactly 6% less than 100, 102 6% less than 101 and so on for each additional gallon. If the value of a gallon of your favorite rye whiskey is $50 per gallon for gallon 1 then how much should you pay in present worth for the 6 contract with Al's Rye Barn if your MARR is 10 per month QUESTION 2 If you could extend the contract in problem 1 to 150 months instead of 72, then: In month 150, the marginal value of a gallon of rye whiskey would be $0, thus after this you would have to either get it for free or Als Rye Barn would have to pay you to take more. You would probably have liver disease. Your alternative, or opportunity cost, would now be a better choice considering how much you value rye whiskey at this point All of the above As in the Indicator, you value water very much when you have none and you get a first few gallons. You value it less after getting 20 gallons. Less than that after getting 200 gallons. And so on. You made an agreement with Als Rye Barn to buy 10 gallons of rye whiskey per month, every month, for the next 6 years. Obviously you love rye whiskey. However, it has a marginal value to you. After 100 gallons, you begin to value each gallon less. In fact, you value gallon 101 exactly 6% less than 100, 102 6% less than 101 and so on for each additional gallon. If the value of a gallon of your favorite rye whiskey is $50 per gallon for gallon 1 then how much should you pay in present worth for the 6 contract with Al's Rye Barn if your MARR is 10% per month
