9 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% 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 per with the $5000 estimate?
9 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% 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 per with the $5000 estimate?
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:posit and never added even a single dollar to the
account, how much did he deposit? Assume that
the account increased at a rate of 10% per year and
that the inflation rate during that time period was
3% per year.
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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