Bob received a new 5-weight, 9 foot Sage XP fly rod for Christmas. The rod cost his wife $1000 at the local fly shop. The only problem is Bob already has a 5-weight, 9 foot, Sage XP fly rod. Bob is trying to decide whether to return the rod to the store, which involves driving out to the suburbs, a trip that will take 1.5 hours roundtrip. Alternatively, he can keep the rod and give it to his college age son, Little Bob, for his birthday, which is in 5 months. Bob does not expect the price of the rod to change over the next year.

If the annual interest rate is 6%, how high does the value of Bob's time (per hour) have to be for the trip to the mall to be zero NPV? He will have to go to the mall in 5 months anyway, to shop for a birthday present for McKenzie, Little Bob's twin sister, but going now would be a special trip. (Ignore the cost of gas for the trip).

Answer rating: 100% (QA)

ANSWER If Bob purchases the rod after 5 months ... View the full answer