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  3. the market price of the air conditioning is $1500.

The market price of the air conditioning is $1500. An air conditioning company offers...

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Question

Accounting

The market price of the air conditioning is $1500. An air conditioning
company offers a warranty of three years on a new air conditioner, at the
cost of $140. The air conditioner has a 15% probability of a breakdown each
year. A similar air conditioner will cost $1000 in year 1,$650 in year 2,
and $350 year 3. The interest rate on your credit card is 12%.
Refer to the scenario above. The net present value of buying the warranty is?
a. $278
b. $109.02
c. $135.65
d. $85
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