Terry Hogan is a technology buff, with a particular interest in video and audio. Terry is contemplating replacing his 55-inch regular-definition projection TV with a 55-inch high-definition projection TV (HDTV). Terry has done extensive research and has identified the specific model that he wishes to purchase. Terry purchased his "old" TV for $1,500 one year ago. The new HDTV costs $1,699 plus 6% in sales tax. Finally, Terry's neighbor has offered to purchase Terry's old TV for $600.

Required:

a. List the costs and benefits, both quantitative and qualitative, that Terry should consider in his decision.

b. Suppose Terry still owes $300 on his old TV set. How, if at all, does this information affect Terry's decision?

c. Suppose a flood in Terry's basement destroys his current (i.e., "old") TV. Terry receives $600 from his insurance provider to cover the associated loss. Terry can replace the old TV with an identical model for $600. How, if at all, does this information change the value of purchasing the HDTV?