Final answer:
The Net Present Value (NPV) of the microwave oven, after calculating the present value of the $68 annual savings over five years at a 4% return, and subtracting the cost of the microwave, is $143.75.
Step-by-step explanation:
To calculate the net present value (NPV) of the microwave, we first need to determine the present value (PV) of the annual savings of $68 over the course of five years. Assuming an average return of 4%, the present value of the savings can be calculated using the formula for the present value of an annuity:
PV = Pmt × ((1 - (1 + r)^{-n}) / r)
Where Pmt is the annual payment ($68), r is the rate of return per period (0.04), and n is the number of periods (5).
Let's calculate the PV:
PV = $68 × ((1 - (1 + 0.04)^{-5}) / 0.04) = $68 × 4.4522 = $302.75
After finding the present value of the savings, we subtract the cost of the microwave ($159) to find the NPV:
NPV = PV - Cost = $302.75 - $159 = $143.75
Therefore, the net present value of the microwave oven is $143.75.