7. Carlsbad Gas and Electric is planning to purchase a degassing tower for removing CO 2 from acidified saltwater. The supplier quoted a price of $125,000 if the unit is purchased within the next 3 years. Your supervisor has asked you to calculate the present worth of the tower when considering inflation. Assuming the tower will not be purchased for 3 years, calculate the present worth at an interest rate of 10% per year and an inflation rate of 4% per year.

7. Carlsbad Gas and Electric is planning to purchase a degassing tower for removing CO 2 from acidified saltwater. The supplier quoted a price of $125,000 if the unit is purchased within the next 3 years. Your supervisor has asked you to calculate the present worth of the tower when considering inflation. Assuming the tower will not be purchased for 3 years, calculate the present worth at an interest rate of 10% per year and an inflation rate of 4% per year.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

See similar textbooks

Related questions

Q: You would like to buy a house that is currently on the market at $15,000, but you cannot afford it…

A: The market value (present value) = $15000 Number of years (n ) = 15 years Interest rate = 8%

Q: You and your sister went shopping today for jeans. The pair she bought cost $49.95 and it is…

A: The annual inflation rate measures the percentage changes in the average price level of a bundle of…

Q: An engineer who is now 65 years old began planning for retirement 40 years ago. At that time, he…

Q: Krystyna has a long-term consulting contract with an insurance company that guarantees her $24,000…

A: We can calculate the present value of the contract by using the nominal MARR. Nominal MARR can be…

Q: Set-E8. A newspaper reports that in the last 5 years, prices have increased a total of 80%. This is…

A: Let the annual inflation rate = r 80% increase in value means 1.8 time of original value. That means…

Q: Find the present worth of earthmoving equipment that has a first cost today of $147,000, an annual…

A: Present Worth Calculations for Earthmoving Equipment:Given:First Cost (Today) = $147,000Annual…

Q: For many years, college cost (including tuition, fees, room, and board) increases have been higher…

A: Estimated total cost refers to the anticipated or predicted total cost of a specific expense or…

Q: The two machines shown are being considered for a chip manufacturing operation. Assume the MARR is a…

A: [1] Calculating annual worth when there is constant-value dollar : While calculating with…

Q: QUESTION-2 Someone calculated the futureaworth of his investment in term of today's dollars. The…

A: Given; Obtained Result = $945,895 Expected Life of the Investment = 20 years Average Inflation Rate…

Q: machine cost P 20,000 today. If the inflation is 6% per year and interest is 10% per year, what…

A: The FW of an asset is computed as, FV=PW(1+r)n Here PW is the present worth, r is the rate of…

Q: Your aunt Janet bought a land for $125,000 cash 12 years ago. The inflation rate has avearged 4% per…

A: Inflation refers to the sustained increase in the general price level of goods and services in an…

Q: Canada's government savings bonds pay 2.5% annual real rate of return compounded daily. Professor…

A: Annual real rate of return on savings bond= 2.5 percent compounded daily.Amount of money invested by…

Q: 8 years ago a machine cost $774000. Now, the same machine costs $1546000. The average rate of…

A: Inflation is the rate of increase in prices over a given period of time. Inflation is typically a…

Q: You would like to buy carcar t is currently on the market at $85,000, but you cannot afford it right…

Q: A small heat pump now costs $2,400 to purchase and install. It has a projected useful life of 18…

A: Initial cost=$2400 Annual maintenance cost=$125per year and increase by 5% per year Annual cost of…

Q: If the inflation rate is 4.8% per year and themarket interest rate is known to be 10.2% per…

A: Market interest rate is the nominal interest rate before taking inflation into account. A real…

Question

7. Carlsbad Gas and Electric is planning to purchase a degassing tower for removing CO
2 from acidified saltwater. The supplier quoted a price of $125,000 if the unit is
purchased within the next 3 years. Your supervisor has asked you to calculate the
present worth of the tower when considering inflation. Assuming the tower will not
be purchased for 3 years, calculate the present worth at an interest rate of 10% per
year and an inflation rate of 4% per year.

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

SEE SOLUTION Check out a sample Q&A here

Step 1

VIEW

Step 2

VIEW

Step by step

Solved in 2 steps with 2 images

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.

Similar questions

The cost of constructing a roundabout (R/A) in a low-traffic residential neighborhood 5 years ago was $625,000. A civil engineer designing another R/A that is almost the same design estimates the cost today will be $740,000. If the cost had increased only by the inflation rate over the 5 years, determine the inflation rate per year.
Find the present worth of earthmoving equipment that has a first cost today of $145,000, an annual operating cost of $60,000, and a salvage value of 20% of the first cost after 5 years, these estimates being in future dollars. Assume that the real interest rate is 12% per year and that inflation has averaged 7% per year. Solve with inflation (a) not accounted for and (b) accounted for. a) The present worth with inflation not accounted for is $ b) The present worth with inflation accounted for is $
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.
Find the present worth of earthmoving equipment that has a first cost today of $139,000, an annual operating cost of $54,000, and a salvage value of 20% of the first cost after 5 years, these estimates being in future dollars. Assume that the real interest rate is 10% per year and that inflation has averaged 5% per year. Solve with inflation (a) not accounted for and (b) accounted for. a) The present worth with inflation not accounted for is $ b) The present worth with inflation accounted for is $
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.