A plant manager is not sure whether he will get the approval to buy new equipment for automating an engine assembly line now or at some future time within the next three years. In order to have the money whenever he is given the go-ahead, he has asked you to tell him what the equipment is likelyto cost in each of the next three years. The cost of the equipment today is $300,000. How much will it cost at the end of years 1, 2, and 3, if the cost increases only by the inflation rate of 4% per year? Use a market interest rate of 15% per year.
A plant manager is not sure whether he will get the approval to buy new equipment for automating an engine assembly line now or at some future time within the next three years. In order to have the money whenever he is given the go-ahead, he has asked you to tell him what the equipment is likelyto cost in each of the next three years. The cost of the equipment today is $300,000. How much will it cost at the end of years 1, 2, and 3, if the cost increases only by the inflation rate of 4% per year? Use a market interest rate of 15% per year.
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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A plant manager is not sure whether he will get the approval to buy new equipment for automating an engine assembly line now or at some future time within the next three years. In order to have the money whenever he is given the go-ahead, he has asked you to tell him what the equipment is likely
to cost in each of the next three years. The cost of the equipment today is $300,000. How much will it cost at the end of years 1, 2, and 3, if the cost increases only by the inflation rate of 4% per year? Use a market interest rate of 15% per year.
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