Question: Thomas is considering buying an artificial Christmas tree. The tree costs $285 and is expected to last six years. The alternative is to keep purchasing

Thomas is considering buying an artificial Christmas tree. The tree costs $285 and is expected to last six years. The alternative is to keep purchasing natural trees, which currently cost $35 (Christmas year 0) and are expected to increase $5 in price each coming year.(Note: Draw two cash flow diagrams for this problem.)

a. What decision would you advise regarding the two options?

b. What additional information may be useful or necessary in order to make a decision?

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Cash Flow Diagrams Artificial Christmas Tree Option Year Cash Outflow 0 285 1 0 2 0 3 0 4 0 5 0 6 0 ... View full answer

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