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 $
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 $
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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![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 $](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F8e3f1499-7590-42ea-9cf4-308b2cbacf18%2Ff0bd2ac6-8365-4cf3-b028-ee27234896c5%2F9nm41c7_processed.png&w=3840&q=75)
Transcribed Image Text: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 $
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