You are in the market for a new refrigerator for your companys lounge, and you have narrowed

Question:

You are in the market for a new refrigerator for your company’s lounge, and you have narrowed the search down to two models. The energy- efficient model sells for $ 700 and will save you $ 45 at the end of each of the next five years in electricity costs. The standard model has features similar to the energy- efficient model but provides no future saving in electricity costs. It is priced at only $ 500. Assuming your opportunity cost of funds is 6 percent, which refrigerator should you purchase?

Opportunity Cost
Opportunity cost is the profit lost when one alternative is selected over another. The Opportunity Cost refers to the expected returns from the second best alternative use of resources that are foregone due to the scarcity of resources such as land,...