Suppose you are a health fitness consultant. Your clients come to you for advice ranging from diet

and nutrition to exercise. One of your clients is Dustin Winthrop. He is relatively healthy but has

an underlying health condition that puts him in the vulnerable category for COVID-19. He is

worried about going back to the gym to workout once Monterey County lets gyms reopen. He

wants you to help him evaluate two options:

Option A: Go back to the gym. He is currently paying $130 per month for a gym membership. He

assumes that this price will likely remain the same for the next 6 years. If he goes back to the gym,

he will make sure to observe social distancing, wear gloves and a face mask, and make sure each

equipment that he uses is wiped down and sanitized.

Option B: Purchase Tonal. A home gym that costs $2,995. He also has to purchase equipment

worth $495 and pay for installation (assume this is $350) and taxes (assume the sales tax is 9.5%

and will be applied to the total cost). He also has to pay a $49 per month membership fee. He

assumes this monthly membership fee will likely remain the same for the next 6 years.

Dustin plans to stay on his workout regimen for the next six years. His opportunity cost,

i.e., discount rate is 2.25%

Your job is to make a recommendation about which option will be more cost effective using NPV,

assuming he works out for the next 6 years.