Sam Is Considering the Purchase of a Vending Machine to Sell

question 81

Essay

Sam is considering the purchase of a vending machine to sell sodas. The cost of the vending machine is $3,400. Sam estimates that the vending machine will last for five years and will provide net income of $800 each year for its lifetime.
a. If Sam pays $3,400 for the vending machine today, what is its net present value at 7%? Should Sam purchase the vending machine?
b. If Sam pays $3,400 for the vending machine today, what is its net present value at 5%? Should Sam purchase the vending machine?
c. Suppose the seller of the vending machine allows Sam to defer, without penalty or interest, payment for the vending machine until the end of the first year. What is its net present value at 7%? Should Sam purchase the vending machine?

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Definitions:

Self-Concept

An individual's perception of themselves, covering beliefs, feelings, and thoughts about their own identity and abilities.

Q-Sort

A method used in psychology to assess individuals' viewpoints or personality traits through the sorting of statements.

Therapy

The treatment of mental, emotional, or behavioral disorders through psychological methods.

Self-Concept Change

The process of transformation or modification in one's perception of oneself, including aspects like identity, qualities, and capabilities.