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 thereafter for the next 8 years. 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
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 thereafter for the next 8 years. 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
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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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 thereafter for the next 8
years. 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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