10.19 The makers of Lifestraw, a filter designed to allow the user to drink water safely from a stream, have a financial decision to make. Implementing an au- tomated assembly process will cost $5000 per year for the next 6 years. The interest rate is 15% per year and the inflation rate is 5% per year. (a) What is the amount they can spend now in lieu of these future costs? Solve using factors and a spread- sheet. (b) If only $12,000 is available now, what is the maximum equivalent amount that can be spent for each of the 6 years? How does this compare with the $5000 estimate?

10.19 The makers of Lifestraw, a filter designed to allow the user to drink water safely from a stream, have a financial decision to make. Implementing an au- tomated assembly process will cost $5000 per year for the next 6 years. The interest rate is 15% per year and the inflation rate is 5% per year. (a) What is the amount they can spend now in lieu of these future costs? Solve using factors and a spread- sheet. (b) If only $12,000 is available now, what is the maximum equivalent amount that can be spent for each of the 6 years? How does this compare with the $5000 estimate?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

See similar textbooks

Similar questions

If an item costs $200.00 today and the inflation rate is 3%, what will the price be in 10 years?
A software company’s labor requirements currently cost $350,000/year. The labor hour requirements are expected to increase by 10% per year over the next five years. If inflation is 4%, determine the labor costs after 5 years using: a. Then-current dollars. b. Constant-worth dollars.
How much must you invest exactly 5 years from now to have $500,000 in today’s buying power 20 years from now? You can invest your money at 10% per year and inflation runs 4%.
You are saving to buy a car which in 2022 costs $30,000. You intend to make 36 equal consecutive payments to an account starting one month from now. The interest rate is .5% per month, compounded monthly. If the inflation rate is 4% per year compounded annually, how much in actual dollars should the periodic payments be.
John borrowed $7,000 from a commercial bank for 6 years to pay his tuition fee. Calculate the interest owed on this loan after 6 years in real dollars if the bank charges 7% annual (current) interest rate and annual inflation is 3%.
Today you borrowed $90,000 from a bank at an interest rate of 10.25%, compounded monthly. You are supposed to repay the loan and its interest charges in equal monthly payments over a 15-year period, with the first payment in a month from now. The estimated annual inflation rate is 6%, compounded monthly.(a) What is the amount of your monthly payments?(b) What is the bank's real effective annual rate of return on this deal after taking inflation into account?
Your manager has decided to invest $4350 dollars at an annual interest rate of 8.0% to buy raw material that it is needed one of the main manufacturing processes of your company. The current price of the raw material is $4.0 per kilogram. If the annual inflation is 5.0%, how many kilograms of raw material will your manager be able to purchase in 8 years? $ What would be the actual dollars amount that will be paid in 8 years for that raw material? 2$
2. An independent contractor is trying to decide whether to lease new equipment now or save his money and purchase it in 5 years' time when he is able to fully pay for the equipment without interest. The cost of the equipment is $73,000 if leased or $85,000 if purchased 5 years from now. At a real MARR of 10% per year and an inflation rate of 4% per year, determine if the company should lease it now or wait and purchase later (a) without any adjustment for inflation and (b) with inflation considered.
If inflation has been running at 2.2% per year and a washing machine costs $460 today, what would it hace cost three years ago? What is the interest rate per period? i=
Henrique is a baseball fan and attends several games per season. His expenses per season are listed in the table below: |Year 1 |Year 2 5 Baseball Tickets Jersey Food Transport $500 $600 |$100 $150 $50 |$120 $150 $80 Calculate the inflation rate for Henrique's baseball season between year 1 and 2. 18.5% O0.18% 15.8% O1.6%
A bicycle tire company performed a web-based study of a popular tire retail price over time. Thestudy indicated that price is set at $16.00 per tire, it was expected to increase to $19.00 over thenext 5 years.a. Determine the annual rate of inflation over 5 years to increase the price from$16.00 to $19.00. b. Determine the market interest rate that must be used in economic equivalencecomputations if inflation is considered and real 8% per year interest rate isexpected.