200 words
You may have heard a salesperson tell you âThis product pays for itself!â While this is probably rare for most products, sometimes there are future savings in money from certain products that will offset some of the costs. For example, if you buy a newer, more reliable, and more fuel-efficient car it may save you on repair bills and gas prices over your old car. If you are a coffee connoisseur, buying a $100 espresso machine might save you money over buying $4 drinks at your local Starbucks.
Think of a purchase you are planning to make or have recently made. How much did it cost? Also, how much per year do you think you will save from this purchase and for how many years will you get these savings? Estimate the present value of the savings, and subtract the cost of the product. Note that it is rare that any purchase will âpay for itselfâ (e.g. have a positive NPV). But are the savings enough that the product becomes a lot âcheaperâ and more worthwhile for you to buy?
200 words
You may have heard a salesperson tell you âThis product pays for itself!â While this is probably rare for most products, sometimes there are future savings in money from certain products that will offset some of the costs. For example, if you buy a newer, more reliable, and more fuel-efficient car it may save you on repair bills and gas prices over your old car. If you are a coffee connoisseur, buying a $100 espresso machine might save you money over buying $4 drinks at your local Starbucks.
Think of a purchase you are planning to make or have recently made. How much did it cost? Also, how much per year do you think you will save from this purchase and for how many years will you get these savings? Estimate the present value of the savings, and subtract the cost of the product. Note that it is rare that any purchase will âpay for itselfâ (e.g. have a positive NPV). But are the savings enough that the product becomes a lot âcheaperâ and more worthwhile for you to buy?
