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You are buying a new appliance. From past experience you estimate future repair costs as: First year..... $5 Second year.... $15 Third year.... $25 Fourth
You are buying a new appliance. From past experience you estimate future repair costs as:
First year..... $5
Second year.... $15
Third year.... $25
Fourth tear.... $35
The dealer offers to sell you a four year warranty for $60. You require at least a 6% interest rate on your investments. Should you invest in the warranty? Support your answer with calculations.
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