Chillingsworth Has a Neighbor, Shivers, Who Faces the Same Options

question 5

Multiple Choice

Chillingsworth has a neighbor, Shivers, who faces the same options for insulating his house as Chillingsworth.But Shivers has a larger house.Shivers's annual fuel bill for home heating is 700 dollars per year.Plan A will reduce his annual fuel bill by 15%, plan B will reduce it by 20%, and plan C will eliminate his need for heating fuel altogether.The plan A insulation job would cost Shivers 700 dollars, plan B would cost him 1,200 dollars, and plan C would cost him 7,700 dollars.If the interest rate is 10% and his house and the insulation job last forever, which plan is the best for Shivers?

• A)Plan A.
• B)Plan B.
• C)Plans A and B are equally good.
• D)Plan C.
• E)He is best off using none of the plans.

---

Definitions:

Trial Balance

A trial balance is a bookkeeping report that lists the balances of all general ledger accounts of a company at a specific time, used to verify the equality of debits and credits.

Ledger

A book or collection of financial accounts where transactions are recorded, including credits and debits, typically categorized for easy tracking.

Creditors

Individuals or entities that have provided goods, services, or loans to another entity, to which the latter is obliged to repay.

Purchases

Transactions involving the acquisition of goods or services in exchange for payment, contributing to a business's inventory or operational needs.