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In: Finance

Assume you are looking to purchase a refrigerator. You consider performance, energy efficiency, durability and brand...

  1. Assume you are looking to purchase a refrigerator. You consider performance, energy efficiency, durability and brand as important attributes with weights of 0.4, 0.3, 0.2 and 0.1 respectively. Then you gather ratings for three refrigerators with respect to these attributes as follows.

GE

Bosch

LG

Performance

7

8

8

Energy efficiency

6

7

8

Durability

8

8

6

Brand

9

7

8

Cost

$2,300

$2,500

$2,300

Which refrigerator would you choose and why?

  1. Car decision. Assume you need a car and you are evaluating lease vs. buy options. The buying option is with auto loan at interest rate of 3%. The dealer offers you the following.

Lease option: $2,000 security deposit, $500 monthly payment for 48 months. Expected end of lease charges are $600.

Purchase option: $4,000 down payment, $600 monthly payment for 48 months. At the end the car is estimated to have resale value of $8,000.

Do the proper analyses and decide which option is better.

Solutions

Expert Solution

LG is selected.

The points given for each attribute for a brand is multiplied by the respective weightage given for that attribute. This gives the Attribute weighted points . for each attribute this attribute weighted points is arrived. Brand wise -Attribute weighted points are added to arrive at the total of Attribute weighted points for each brand (highlighted in yellow)

as seen from the totals, LG and Bosch have the highest Attribute weighted points of 7.60. Since there is a tie in points, the next attribute of cost is seen. Since LG is cheaper by $200 (2500-2300) it is selected due to lower cost.

workings are:

excel formulas

...

jeff jeffy answered 2 years ago
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