Chemical engineers at a Coleman Industries plant in the Midwest have determined that a small amount of a newly available chemical additive will increase the water repellency of Coleman’s tent fabric by 20%. The plant superintendent has arranged to purchase the additive through a 5-year contract at $7000 per year, starting 1 year from now. He expects the annual price to increase by 12% per year starting in the sixth year and thereafter through year 13. Additionally, an initial investment of $35,000 was made now to prepare a site suitable for the contractor to deliver the additive. Use i = 15%per year to determine the equivalent total present worth for all these cash flows.
Chemical engineers at a Coleman Industries plant in the Midwest have determined that a small amount of a newly available chemical additive will increase the water repellency of Coleman’s tent fabric by 20%. The plant superintendent has arranged to purchase the additive through a 5-year contract at $7000 per year, starting 1 year from now. He expects the annual price to increase by 12% per year starting in the sixth year and thereafter through year 13. Additionally, an initial investment of $35,000 was made now to prepare a site suitable for the contractor to deliver the additive. Use i = 15%per year to determine the equivalent total present worth for all these cash flows.
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
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Chemical engineers at a Coleman Industries plant in the Midwest have determined that a small amount of a newly available chemical additive will increase the water repellency of Coleman’s tent fabric by 20%. The plant superintendent has arranged to purchase the additive through a 5-year contract at $7000 per year, starting 1 year from now. He expects the annual price to increase by 12% per year starting in the sixth year and thereafter through year 13. Additionally, an initial investment of $35,000 was made now to prepare a site suitable for the contractor to deliver the additive. Use i = 15%per year to determine the equivalent total present worth for all these cash flows.
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