Question

You are considering switching your Internet and cable providers and DIRECTV is advertising an introductory rate of $30 a month for a two-year contract the introductory rate goes away after six months and the rate will raise to $75 a month after that in aaddition to switch now you will be entered into a drawing for a chance to be an extra in the companies next hilarious commercial you pay $50 a month with your current provider and there's no contract should you switch?

Answer 1

The question involves a financial comparison between staying with a current cable provider at a flat rate of $50 a month with no contract, and switching to DIRECTV with an introductory offer and subsequent rate increase. Over two years, DIRECTV is $120 cheaper, not accounting for additional fees or the value of a potential commercial extra opportunity.

Step-by-step explanation:

The scenario given is about evaluating the cost-effectiveness of switching from a current internet and cable service provider to a new one, which is DIRECTV. The cost-benefit analysis includes comparing the introductory rate of $30 for six months with the subsequent price increase to $75 per month for the remaining 18 months of the two-year contract, as opposed to the existing rate of $50 per month without a contract.

For the first six months, the saving with DIRECTV compared to the current provider would be $20 per month. However, once the rate increases after six months, the cost would become $25 per month more expensive than the current provider. Over the course of the two-year contract, the total cost with DIRECTV would be $1,080 ($30x6 + $75x18), as opposed to $1,200 with the current provider ($50x24). Therefore, over two years, DIRECTV would be $120 cheaper, excluding any additional fees and the potential value of the promotional offer.

Answer 2

DIRECTV:

($30)(6) + ($75)(18) = $1530

Current:

($50)(24) + $1200

Do not switch providers.

Step-by-step explanation:

You should not switch providers because, in the long run, you will be paying less money with your current provider than with DIRECTV. Emotionally, you may want to purchase DIRECTV's contract because of the drawing; however, there is a low probability that you would actually be chosen, so it is not worth the increase in payments.