Question: You are determining whether to purchase a tree trimmer on sale for $200 today. There's a 40% chance you will move houses in six month

You are determining whether to purchase a tree trimmer on sale for $200 today. There's a 40% chance you will move houses in six month and no longer have any use for the trimmer ($0 value with no resale option). You will not trim your trees for six months, but the price of the trimmer will be $300 if you wait six months until you need to use it. Use 8% as your discount rate.

What is the NPV if you buy the trimmer today?

What is the NPV if you wait 6 months to buy the trimmer?

What should you do?

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To calculate the Net Present Value NPV we can use the following formula NPV CFt1 rt where NPV ... View full answer

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