Question 2 (5 Marks) Richard and Linda Butler decide that it is time to purchase a high-definition {HD) television because the technology has improved and prices have fallen over the past 3 years. From their research, they narrowed their choices to two sets, the Samsung 42-inch LCD with 1080p capability and the Sony 42-inch LCD with 1080p features. The price of the Samsung is $2,350 and the Sony will cost $2,700. They expect to keep the Samsung for 3 years; if they buy the more expensive Sony unit, they will keep the Sony for 4 years. They expect to be able to sell the Samsung for $400 by the end of 3 years; they expect they could sell the Sony for $350 at the end of year 4. Richard and Linda estimate that the end-of-year entertainment benefits (i.e., not going to movies or events and watching at home) from the Samsung to be $900 and for the Sony to be $1,000. Both sets can be viewed as quality units and are equally risky purchases. They estimate their opportunity cost to be 9%. Which television set Butlers should choose? (5 marks)

Question 2 (5 Marks) Richard and Linda Butler decide that it is time to purchase a high-definition (HD) television because the technology has improved and prices have fallen over the past 3 years. From their research, they narrowed their choices to two sets, the Samsung 42-inch LCD with 1080p capability and the Sony 42 -inch LCD with 1080p features. The price of the Samsung is $2,350 and the Sony will cost $2,700. They expect to keep the Samsung for 3 years; if they buy the more expensive Sony unit, they will keep the Sony for 4 years. They expect to be able to sell the Samsung for $400 by the end of 3 years; they expect they could sell the Sony for $350 at the end of year 4. Richard and Linda estimate that the end-of-year entertainment benefits (i.e., not going to movies or events and watching at home) from the Samsung to be $900 and for the Sony to be $1,000. Both sets can be viewed as quality units and are equally risky purchases. They estimate their opportunity cost to be 9%. Which television set Butlers should choose