14.46. Well-managed companies set aside money to pay for emergencies that inevitably arise in the course of doing business. A commercial solid-waste recycling and disposal company in Mexico City puts 0.10% of its income after-tax income into such an account. (a) How much will the company have after 7 years if after-tax income averages $16.4 million per year and inflation and market interest rates are 4% per year and 9% per year, respectively? (b) What will be the buying power of that amount in today's dollars if the inflation rate is 4% per year?

14.46. Well-managed companies set aside money to pay for emergencies that inevitably arise in the course of doing business. A commercial solid-waste recycling and disposal company in Mexico City puts 0.10% of its income after-tax income into such an account. (a) How much will the company have after 7 years if after-tax income averages $16.4 million per year and inflation and market interest rates are 4% per year and 9% per year, respectively? (b) What will be the buying power of that amount in today's dollars if the inflation rate is 4% per year?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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14.46. Well-managed companies set aside money to pay for emergencies that inevitably arise in the
course of doing business. A commercial solid-waste recycling and disposal company in Mexico City puts
0.10% of its income after-tax income into such an account. (a) How much will the company have after 7
years if after-tax income averages $16.4 million per year and inflation and market interest rates are 4%
per year and 9% per year, respectively? (b) What will be the buying power of that amount in today's
dollars if the inflation rate is 4% per year?

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