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

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Question

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?

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