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2. Julia, a private tutor, is considering buying a new power lawn mower. It would save her 30 minutes of work a week, which she would use to see another client. Her fee is $16 per hour and she works 50 weeks a year. The lawnmower would cost $1,400. What would her IRR be if the mower was expected to last 8 years? Express your figures on an annual basis and assume that her required rate of return is 9 percent.

3. Stan's washing machine broke down. He has a choice of two washing machines of equal performance. The first choice, the GE turbo model, cost $400 and had a PV of $230 in savings over having clothes done through an outside service. The second one, a GE supra, cost $600 and had a PV of $450. Which one should he select?

Answer 1